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TMI Tax Updates - e-Newsletter
November 11, 2024
Case Laws in this Newsletter:
GST
Income Tax
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Taxpayers' pre-deposit refunds for GST appeals allowed.
This corrigendum clarifies that the restriction on refund u/s 150 of the Finance (No. 2) Act, 2024 will not apply to refunds of pre-deposit amounts paid by taxpayers at the time of filing appeals under sub-sections (6) of Section 107 or (8) of Section 112 of the CGST Act, where such appeals are decided in favor of the taxpayer. It inserts this clarification at the end of paragraph 4 of Circular No. 237/31/2024-GST dated 15th October 2024, issued by the Central Board of Indirect Taxes and Customs, GST Policy Wing, Ministry of Finance, Government of India.
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Goods seized for lacking e-way bill despite tax compliance; High Court quashes order citing no tax evasion intent.
Non-generation of e-way bill during transportation of goods led to seizure order u/s 129(3) of GST Act, imposing penalty and interest. However, it was admitted that goods were transported with relevant documents except e-way bill, which was produced before seizure order. No finding recorded regarding intention to evade tax. Relying on precedent, High Court held that in absence of intention to evade tax and production of e-way bill before seizure order, impugned orders cannot be sustained and quashed the same. Petition allowed.
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Apex Court Upholds GST on Royalties Paid for Mining Concessions by State Authorities.
Royalty paid by a mineral concession holder for mining concessions granted by the State is subject to GST levy. The constitutional validity of notifications issued by the Central and Himachal Pradesh governments imposing GST on such royalty payments is upheld. The Supreme Court's nine-judge bench ruling in Mineral Area Development Authority & Anr. v. Steel Authority of India & Anr., overruling its earlier decision in India Cement Limited v. State of Tamil Nadu, clarified that royalty is not a tax. Consequently, the respondents are within their rights to levy GST on royalties paid for mining concessions granted by the State. The High Court upholds the impugned orders and notices regarding GST levy on such royalties and dismisses the petition.
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Cement firm boss accused of siphoning off funds, faces dual FIRs for tax evasion & embezzlement.
High Court dismissed petition seeking quashing of FIR related to clandestine manufacture and supply of cement clinker and cement without invoices and accounting. Court held second FIR maintainable as offense under GST Act would not cover misappropriation of company funds for personal use resulting in wrongful loss. Allegations in second FIR pertain to misappropriation of company funds, distinct from allegations in first FIR regarding document forgery. Complainant having interest in company has locus standi to initiate proceedings. High Court should be slow in interfering with criminal proceedings at initial stage unless complaint discloses no offense or prosecution barred. Powers u/s 482 CrPC wide but require caution in exercise. Investigation at nascent stage, second FIR based on different facts not covered in first FIR, hence maintainable despite some overlap.
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Project Delay Penalty Quashed: Court Sides with Firm for Timely Production Commencement.
The petitioner was directed to pay a 5% penalty of the prevailing plot cost for the belated implementation of the project as per Clause 2.1.2.(a) of O.O.No.30 of 2020. However, the petitioner complied with the clause by utilizing more than 65% of the plot and had commenced production before dispatching goods. Despite paying the penalty amount, the petitioner was again directed to pay a 5% penalty. The Court found infirmity and illegality in the impugned order and quashed it, allowing the petition, as the petitioner had already paid the penalty and commenced production before dispatching goods, complying with all conditions.
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Construction services taxable under GST despite annuity payments exemption.
The High Court dismissed the challenge to the Circular No.150/6/2021 GST dated 17.06.2021, which clarified that annuity payments for construction services are taxable under GST, contrary to the exemption under Sl. No.23-A of Notification No. 12/2017-CT(Rate). The Court held that the Circular did not contravene the Notification or the 22nd GST Council recommendations, as the exemption under Entry 23A covers only access to roads or bridges on payment of annuity, not construction services. The 43rd GST Council clarified that construction services are taxable, though the exemption for access services under Code 9967 remains. The Notifications do not exempt construction services under Code 9954. The Court found no jurisdictional error in issuing the show cause notice and left open the petitioner's claims to be presented before the appropriate authority for determination of contested facts.
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Quashing GST Order for Input Tax Credit in Light of Sadhana Enviro Case.
Petition seeking quashing of Order-in-Original passed u/s 73 of CGST Act, 2017, and Demand Order in GST 07 by Respondent 4. No excess claim of Input Tax Credit for 2019-20 as already denied for 2017-18. Court held issue covered by judgment in M/s. Sadhana Enviro Engineering Services case, where it was ruled that in view of amendment inserting Section 16(5) to CGST/KGST Act, petition should be disposed of, directing original authority to implement provisions after providing reasonable opportunity to petitioner, hearing them, and proceeding in accordance with law. Considering facts, circumstances, and M/s. Sadhana Enviro Engineering judgment, present petition allowed and disposed of accordingly.
Income Tax
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Monetary limits on waiving interest for late tax payment: Up to 50L by Commissioner, 50L-1.5Cr by Chief Commissioner, above 1.5Cr by Pr. Chief Commissioner.
This order u/s 119(1) of the Income-tax Act, 1961 specifies the monetary limits for income-tax authorities to exercise their powers of reduction or waiver of interest payable u/s 220(2) for non-payment of income tax demand. Principal Commissioner/Commissioner can reduce/waive interest up to Rs. 50 lacs, Chief Commissioner/Director General between Rs. 50 lacs to Rs. 1.5 crore, and Principal Chief Commissioner above Rs. 1.5 crore. The reduction/waiver is subject to conditions of genuine hardship, circumstances beyond assessee's control, and assessee's cooperation in proceedings. The order aims to facilitate proper administration of the Act.
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Assessee's claim for TDS credit on salary rejected due to lack of evidence like Form 16 or salary slip.
The Assessee claimed TDS credit on salary, but the employer did not reflect the TDS in Form 26AS or provide Form 16. The Assessee contended that even if the employer deducted TDS but did not deposit it, the Assessee is entitled to the TDS credit as it is benevolent. The ITAT held that while the contention seems reasonable, the Assessee must discharge the primary onus by producing relevant documents. The Assessee filed a TDS working initialed by someone, but it lacked proper letterhead, signatory name, and failed to furnish any salary slip or Form 16 reflecting TDS deduction. Unlike a cited case where the Assessee established the case with documents, the Assessee here failed to do so. Considering the lack of relevant documents, the ITAT remanded the case to the Commissioner for fresh decision in the interest of justice.
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Tribunal rejects AO's profit estimation; accepts assessee's disclosed 5.99% profit.
In a case regarding GP estimation, the Assessing Officer (AO) applied an 8% profit rate on the assessee's turnover, which did not match Form 26AS. The CIT(A), considering past orders, estimated 7% profit. However, the Tribunal held that since the assessee had already disclosed 5.99% profit, no further estimation was required. The profit from the disputed Sri Lanka project was part of the total declared profit. Consequently, the assessee's appeal was allowed, and the AO's estimation was rejected by the ITAT (Appellate Tribunal).
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Turnover calculation dispute under presumptive taxation resolved in taxpayer's favor.
Determination of turnover for presumptive taxation u/s 44AD - The assessee contended that receipts cannot be treated as ancillary receipts as the assessee had already offered income at 6% of the total turnover from eligible business as part of the business income, not on an item-wise basis. The CIT(A) considered the sale bills and ledger account and accepted the assessee's case regarding genuine turnover of Rs. 64,74,859/- and not Rs. 74,26,060/-. The ITAT held that Section 44AD is applicable to the assessee for the relevant AY 2018-19. The decisions relied upon by the CIT(A) dealt with Section 80IB, which is distinct from Section 44AD. The assessee offered to pay tax as per Section 44AD on the total turnover at 6%. The ITAT accepted the assessee's contention, set aside the CIT(A)'s order, and directed the AO to accept the new offer to tax as mentioned by the assessee. The assessee's appeal was allowed.
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Provisional Attachment Orders Under 281B Expired After Six Months Due to Lack of Timely Extension.
Provisional attachment orders u/s 281B were passed on 10.01.2024, valid for six months. The respondents were empowered to extend the provisional attachment for two more years under proviso to Section 281B(2), but failed to do so before expiry. Consequently, the provisional attachment orders ceased to have effect after six months on 10.07.2024, as no extension order was passed. Once an attachment order ceases, its continuation is impermissible unless extended per Section 281B(2) proviso. The HC's interim order of 15.02.2024 continues as long as the impugned provisional attachment order existed.
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Software license sales by Austrian firm not taxable as royalty income in India.
The assessee, a non-resident corporate entity incorporated in Austria, earned income from the sale of software licenses. The Assessing Officer (AO) computed the profit at 15% and taxed it at 40%, alleging that the assessee was not the economic owner of the IPs as most were registered outside Austria, primarily in the USA, and the assessee did not incur expenditure for developing the IPs. However, the Tribunal held that the assessee had substantial revenue from operations in different jurisdictions, including Austria, filed tax returns and was assessed by Austrian Revenue Authorities. The receipts from software license sales in India formed a small part of the total revenue. The allegation of treaty shopping was without credible reasoning. The revenue from software license sales could not be taxed as royalty income in India per judicial precedents. The assessee's tax residency and genuineness could not be doubted in the absence of evidence of fraud or illegal activity, especially when other jurisdictions did not raise such doubts. The BEPS Action Plan cannot influence judicial decision-making without evidence of the assessee lacking commercial or economic substance. Merely registering IPs in different jurisdictions does not divest the assessee's ownership rights. No evidence showed the revenue was repatriated to related parties. Thus, the assessee is entitled to India-Austria DTAA benefits, and the receipts cannot be taxed in.
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Business expenses debated: PMS costs allowed, admin costs disallowed for capital gains.
The assessee, engaged in the business of shares and securities, claimed administration expenses, including Portfolio Management Service (PMS) expenses, against capital gains. The Assessing Officer (AO) disallowed these expenses as excessive and not genuine. The key points are: The Income Tax Appellate Tribunal (ITAT) allowed the PMS expenses, considering the nature of the assessee's business and relying on precedents. However, general administrative expenses like salaries, depreciation, etc., were disallowed under the head 'Capital Gains' as per Section 48 of the Income Tax Act. These expenses can only be claimed against business income or adjusted u/s 71 if there is no business income. Regarding the treatment of share transactions as business or investment, the ITAT upheld the CIT(A)'s decision based on CBDT circulars, allowing the assessee to consistently follow the chosen method. The ITAT rejected the assessee's claim of bogus loss on the purchase and sale of shares, finding the explanations for the substantial price difference unconvincing and lacking prudence.
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(1)(c) Penalty on deemed income from property undervalued, not imposed; but levy upheld for unexplained cash deposits.
Imposition of penalty u/s 271(1)(c) of the Income Tax Act for two types of additions: (1) the addition made u/s 50C on the difference between stamp duty value and sale consideration, and (2) the addition on account of negative cash balance in the books. Regarding the Section 50C addition, it was held that penalty u/s 271(1)(c) cannot be levied when the assessee has not actually received any money over the declared sale consideration, as the addition is based on a deeming fiction. This follows the precedent set in Madan Theatres Ltd. case. However, for the addition due to negative cash balance found in the books, the assessee could not offer an explanation for the excess cash deposited in the bank account. It was held that voluntary disclosure does not preclude penalty u/s 271(1)(c), and since the surrender was after detection, it cannot be considered voluntary. Therefore, the penalty u/s 271(1)(c) was rightly levied by the Assessing Officer and confirmed by the CIT(A). The decision was partly in favor of the assessee, allowing the penalty on Section 50C addition but upholding the penalty on the negative cash balance addition.
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Foreign entity's interconnectivity charges not taxable in India, lacks human element for FTS.
Interconnectivity usage charges received by a foreign entity from an Indian entity cannot be considered as Fees for Technical Services (FTS) under domestic law or the tax treaty. The services were provided without human intervention through an automated system, lacking the human element required for 'technical services' under Explanation 2 to Section 9(1)(vii). The charges cannot be treated as 'other income' u/s 56 or the residual Article 24 of the tax treaty, as they constitute business income covered under Article 7. Since the foreign entity did not have a Permanent Establishment in India, the business profits are taxable only in the country of residence. The interconnectivity charges are not taxable in India, either as FTS or other income.
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Tax scrutiny triggered by search action overtakes regular assessment; undervalued property sale voided.
Assessment u/s 153C versus 143 - Additions u/s 45 - Underreporting of sale consideration for immovable property while framing the Assessment Order u/s 143(3) - Whether the Assessment Order passed by the Assessing Officer u/s 143(3) is illegal and not maintainable in view of the specific provisions of Section 153C. A search action u/s 132 was carried out, and documents were seized. The Assessing Officer recorded a 'Satisfaction Note' u/s 153C. In view of the express satisfaction note recorded u/s 153C for different Assessment Years, including the Assessment Year in question, the proceedings initiated u/s 143(2) for regular assessment must be abated and give way to the special provisions of Section 153C. A similar issue was adjudicated in a case, wherein the assessments framed u/s 143(3) were quashed. Considering the scheme of the Act for assessment of persons other than searched persons codified u/s 153C, the Assessment Order passed u/s 143(3) for the Assessment Year in question stands quashed. Decided in favor of the assessee.
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Currency option trades deemed genuine despite AO's claims; huge profits declared offset questioned losses.
Alleged fraudulent transactions and non-genuine losses claimed by the assessee in currency option trades on the United Stock Exchange (USE). The key points are: The Assessing Officer (AO) relied on the 'Project Falcon' report pertaining to stock option trading on the Bombay Stock Exchange to allege that the assessee's losses from certain currency option trades on USE were non-genuine. However, the ITAT held that the 'Project Falcon' report had no connection with the assessee's trades on USE. The assessee had declared profits from several trades, and only a few transactions showing losses were questioned by the AO without any independent inquiry. The ITAT concluded that there was no material to establish that the specific loss-making transactions were non-genuine, especially when the assessee had declared huge profits from similar transactions. The AO also made additions u/s 69C for commission on non-genuine losses, based on a statement by Arun Shah in 'Project Falcon'. However, the ITAT held that the statement had no reference to the assessee's trades, and the assessee should have been given an opportunity to rebut or cross-examine. The adhoc commission rate applied by the AO and reduced by the CIT(A) was also unsupported by evidence. The ITAT deleted the additions made by the AO for.
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TDS on agency service payments: Assessee provided evidence, CIT(A) reasoned order upheld by ITAT.
Tax deducted at source (TDS) issue related to agency services payments. Assessee demonstrated Form No. 3CD and Annexure D, showing TDS deducted u/s 194C on payments to partner firm. Commissioner of Income Tax (Appeals) [CIT(A)] examined facts, provisions, assessee's submissions, and Clause 23 of Tax Audit Report regarding payments u/s 40A(2)(b). CIT(A) passed reasoned order after considering factual information. Income Tax Appellate Tribunal (ITAT) upheld CIT(A)'s order, finding no infirmity, and dismissed revenue's appeal grounds.
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Development fees for infrastructure creation by charitable education institutions are capital receipts, not revenue.
The development fund received from students, apart from tuition fees, is treated as a capital receipt or corpus donation, not a revenue receipt. The fund is utilized for creating capital assets like school buildings and infrastructure, fulfilling the society's objectives. The litmus test for a charitable institution is the application of funds, not the source of contributions. If the development fees are used for infrastructure creation, they are considered capital receipts. The advances given to staff, suppliers, and sister concerns were not treated as misappropriation of funds or investments violating Section 11(5) and 13(1)(d). The institutions receiving non-interest-bearing loans are also registered u/s 12AA and controlled by the same management, ruling out tax avoidance schemes. The rejection of accounts u/s 145(3) and the ad-hoc disallowance of 20% by the Assessing Officer, reduced to 10% by the CIT(A), is not concurred with. The expense ratio has declined compared to previous years, and the expenses claimed are reasonable, considering past accepted assessments. The ITAT finds no error in the CIT(A)'s order on this issue.
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Not debited expenses allowed; Disallowance upheld for bogus claims; Sundry creditors need explanation; Remitted for fresh adjudication; TDS default verification ordered.
Lease rentals paid by the appellant to the owner of leased assets for using those assets for business purposes are allowable revenue expenditure, despite not being debited in books of accounts, as the genuineness was not questioned. Conveyance and telephone expenses disallowed as bogus by lower authorities upheld due to lack of contrary evidence. Regarding sundry creditors, the appellant must explain their genuineness if questioned, as idle/unaltered/static creditors require verification. The matter remitted to the AO for de-novo consideration after providing reasonable opportunity of being heard to the appellant. For TDS default disallowance, the AO directed to verify if the expenditure was offered for tax earlier and fulfills conditions for allowability in the relevant year after late TDS deposit.
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Voluntarily offered income during search can't attract penalty; lack of evidence nullifies penalties imposed.
Penalty u/s 271(1)(c) was levied on additional income voluntarily offered in the statement recorded u/s 132(4). However, no reference was made to corroborative incriminating material found during the search. It was held that the CIT(A) erred in confirming the penalty u/s 271(1)(c) since the additional income was voluntarily offered. Regarding penalty u/s 271AAB, undisclosed income is defined as income represented by money, bullion, jewellery, or entries in books found during the search but not recorded before the search date. No incriminating material having a nexus with the undisclosed income offered during the search was referred to. Consequently, the Assessing Officer lacked jurisdiction to initiate penalty u/s 271AAB. Following the Paras Mal Jain case, the surrendered income cannot be construed as undisclosed income specified in the explanation to Section 271AAB(1). Therefore, the penalty of Rs. 5 lacs u/s 271AAB was deleted in favor of the assessee.
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Reassessment Notice Timely, But Order Remanded For Fresh Adjudication.
Reopening of assessment beyond the period of limitation was challenged, but the notice u/s 148 was issued within the six-year time limit on 28.03.2018 and served on 02.04.2018, complying with Section 149's requirement for issuing the notice. The legality of the assessment order was questioned due to the dismissal of the financial creditor's petition under the Insolvency & Bankruptcy Code, 2016, but the Assessing Officer had no information about the NCLT order at the time of passing the reassessment order. The addition based on audited financial statements submitted to Punjab National Bank was remitted to the Assessing Officer for de novo consideration and fresh decision, with the assessee directed to file necessary documents for proper adjudication. The appeal was partly allowed for statistical purposes.
Customs
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New rules for insurance and bond value for cargo handlers and logistics operators in customs areas.
This circular provides clarification on the insurance amount and bond value for Customs Cargo Service Providers (CCSPs) and the validity of bonds for Authorized Economic Operators - Logistics Operators (AEO-LOs). It modifies the earlier circular regarding the insurance amount to be provided by CCSPs under Regulation 5(1)(iii) of the Handling of Cargo in Customs Areas Regulations, 2009 (HCCAR). The insurance amount should now be equal to the average value of goods likely to be stored for 5 days instead of 10 days, based on projected capacity. The custodian bond value for imported/exported goods has also been reduced to 5 days' storage from the current 10 days. For AEO-LO CCSPs, the approval as custodians is valid till their AEO authorization remains valid and not suspended or revoked, and the custodian bond's validity is the same as the approval granted under Regulation 10 of HCCAR.
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Automating warehouse procedures - license, transfers, returns with online filing and grievance redressal.
The notice outlines the digitization of Customs Bonded Warehouse procedures relating to obtaining Warehouse License, Bond to Bond Movement of warehoused goods, and uploading of Monthly Returns. It enables online filing of applications for Warehouse License, submission and processing of requests for transfer of warehoused goods to another person/warehouse, and uploading Monthly Returns. The process flows for different scenarios of transfer of warehoused goods, such as change in ownership without change in warehouse, change in warehouse with no change in ownership, and change in warehouse and ownership, are detailed. The notice also highlights the requirement of furnishing security and triple duty bond, validation of bond details, and intimation to officers at the Port of Import. User Manuals are provided for guidance, and grievance redressal mechanisms are specified.
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Balancing tax evasion probes with business convenience in import/export.
These guidelines instruct customs field formations on maintaining a balance between ease of doing business and investigating tax evasion cases related to import or export. Key points include: Commissioners must approve all investigations, which should conclude within one year. Thorough analysis using available data, technical literature, industry practices, and legal frameworks should precede investigations. Open-source information and existing investigations should be cross-checked. Commissioners may involve DRI for cross-jurisdictional relevance. Principles of ease of doing business like preferring written requests, reasonable timelines, relevance of information sought, prior approval for summons content, considering difficulties faced by entities, disclosing inquiry nature, allowing authorized agents, limiting document requests, and timely case closures must be followed. Voluntary payment provisions should be informed during searches/investigations without pending recoveries. Commissioners should oversee investigations and address reasonable grievances through meetings.
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Customs cargo clearance time reduced, AEO service providers get relief.
The notification amends the Handling of Cargo in Customs Areas Regulations, 2009. It reduces the time period for keeping uncleared cargo in a customs area from 10 days to 5 days. For Customs Cargo Service Providers authorized under the Authorized Economic Operator Programme, their approval for appointment shall remain valid until their AEO authorization is valid and not suspended or revoked. The amendments aim to enhance efficiency in cargo handling and clearance procedures within customs areas.
State GST
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Goa govt clarifies data hosting services by Indian providers to overseas cloud firms is export of services; place of supply is recipient's location.
Goa government circular clarifying place of supply for data hosting services provided by Indian service providers to overseas cloud computing service providers. Key points: Data hosting service providers not considered intermediaries under IGST Act; services not related to goods made available by recipient or immovable property. Place of supply determined by default provision u/s 13(2) IGST Act as location of recipient. Services provided to overseas cloud computing entities qualify as export of services subject to conditions u/s 2(6) IGST Act. Circular issued for uniform implementation of the clarification.
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Demo vehicles for potential buyers - ITC eligibility clarified.
The circular clarifies the availability of input tax credit on demo vehicles used by authorized dealers for providing trial runs and demonstrating features to potential buyers. It covers two key issues: availability of ITC on demo vehicles u/s 17(5)(a) of the CGST Act, and availability of ITC where demo vehicles are capitalized by dealers. The circular states that demo vehicles promote sale of similar vehicles and are thus used for 'further supply', qualifying for ITC u/s 17(5)(a)(A). However, ITC is not available if vehicles are used for staff transportation. For dealers acting as agents, providing test drives on behalf of manufacturers, ITC is not available as they are not making further supply. The circular also clarifies that capitalization of demo vehicles does not impact ITC availability, subject to conditions like depreciation claims under Income Tax Act. Dealers must pay applicable tax when subsequently selling capitalized demo vehicles.
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Advertising services by Indian agencies for foreign clients - Not intermediaries.
This circular clarifies the position regarding advertising services provided by Indian advertising companies/agencies to foreign clients. It addresses three key issues: whether the advertising company can be considered an intermediary, whether the foreign client's representative in India or target audience can be considered the recipient, and whether such services qualify as performance-based services under IGST Act. The circular clarifies that the advertising company is not an intermediary but provides services on a principal-to-principal basis. The foreign client, not its Indian representative or target audience, is the recipient. Such advertising services do not qualify as performance-based services u/s 13(3) of IGST Act. Consequently, the place of supply is determined u/s 13(2) as the location of the recipient, i.e., outside India, making it an export of services. However, if the advertising company merely facilitates the provision of media space between the foreign client and media owner, acting as an intermediary, the place of supply is determined u/s 13(8)(b) as the location of the intermediary.
IBC
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New arbitration plea needs court nod after withdrawing previous one under Indian law.
Application u/s 11(6) of Arbitration and Conciliation Act, 1996 maintainable only with court's liberty upon withdrawal of previous application. Principles of Order 23 Rule 1 CPC extended to Section 11(6) proceedings. Fresh application arising from same cause of action not maintainable without court's permission upon unconditional withdrawal of previous application. Application u/s 11(6) commences actual arbitration proceedings, not mere appointment. Limitation period for filing Section 11(6) application is three years under Article 137 of Limitation Act. Benefit of Section 14, Limitation Act available for condonation of delay. Section 5, Limitation Act allows condonation of delay in exceptional cases with strong grounds for Section 11(6) applications, considering legislative intent of expeditious dispute resolution under the Act.
Indian Laws
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Double royalty payment for miners upheld by SC, consultations ordered on cascading effect.
The Supreme Court upheld the validity of the Explanations to Rule 38 of the Mineral (Other than Atomic and Hydrocarbons Energy Minerals) Concession Rules, 2016 and Rule 45 of the Mineral Conservation and Development Rules, 2017, which provide for the computation of royalty without deducting previous royalty payments, contributions to the District Mineral Foundation, and National Mineral Exploration Trust. The Court observed that policy decisions fall within the executive's domain, and courts should refrain from interfering unless the policy is absolutely capricious or illegal. While the Explanations might have onerous monetary implications for mining leaseholders, the Court found no excess of power or statutory breach. The Explanations were deemed clarificatory and within the ambit of the main provisions. However, the Court granted the respondents two months to conclude public consultations and take a final decision on amending the cascading impact of royalty on royalty in calculating the average sale price under the Explanations.
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Only examine arbitration agreement at Section 11 stage, leave merits & limitation to tribunal.
The Supreme Court held that at the stage of Section 11 application under the Arbitration and Conciliation Act, 1996, the referral courts need only examine whether the arbitration agreement exists, and not delve into the merits of the claims. However, in rare cases where it is manifest that the claims are ex facie time-barred and dead, or there is no subsisting dispute, the courts can decline the reference to arbitration. The Court clarified that the period of limitation for filing a petition seeking appointment of an arbitrator cannot be conflated with the period of limitation applicable to substantive claims under the commercial contract. While the respondents contended that the petitioner's claims were time-barred, the Court left it to the arbitral tribunal to adjudicate upon this issue as a preliminary matter, as the existence of the arbitration agreement was not disputed.
SEBI
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Mutual funds must disclose expenses, returns & risk levels for direct & regular plans. Color-coded risk-o-meter changes to be notified.
This circular mandates mutual funds to disclose expenses, half-yearly returns, and yield separately for direct and regular plans. It introduces a color scheme for the risk-o-meter depicting risk levels. Any change in the risk-o-meter must be communicated to unitholders by displaying the existing and revised risk-o-meters. The provisions aim to enhance transparency, ease investor comprehension, and standardize disclosures across the mutual fund industry.
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Indian Mutual Funds Get Green Light for Overseas Counterparts with 25% India Exposure Cap.
This circular permits Indian mutual funds to invest in overseas mutual funds/unit trusts (MF/UTs) with exposure to Indian securities, subject to certain conditions. The key points are: Indian MF schemes can invest in overseas MF/UTs with up to 25% exposure to Indian securities. The overseas MF/UTs must have pooled investments, pari-passu rights for investors, independent fund management, public portfolio disclosure, and no advisory agreements with Indian MFs. If an overseas MF/UT exceeds 25% India exposure, Indian MFs have 6 months to monitor portfolio rebalancing, cannot make fresh investments during this period, and must liquidate holdings over the next 6 months if not rebalanced. Non-compliance attracts restrictions on fresh subscriptions, new fund launches, and exit loads. Indian MFs are exempted from fundamental attribute change for switching overseas MF/UTs in case of breach of 25% limit.
Service Tax
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Educational institution's hostel construction not taxable as commercial service.
The Tribunal held that the construction of a hostel building for an educational institution, in this case, the Gujarat Adani Institute of Medical Science, cannot be considered a 'commercial or industrial construction service'. This aligns with previous rulings by the Tribunal and the Rajasthan High Court, which established that the construction of buildings for educational institutions does not fall under the category of 'commercial or industrial construction service'. Consequently, the service in question is not taxable under that head. The demand raised in the present case is deemed unsustainable, and the impugned order is set aside, allowing the appeal.
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Unbilled amounts not taxable for services, rules Supreme Court.
Service tax demand on unbilled amount not chargeable. Section 67 clearly states that only the gross amount charged from the service recipient shall be considered as the gross value for service tax. The unbilled amount, not charged by the appellant to the service recipient, is not part of the gross value u/s 67. Hence, the unbilled amount is not liable to service tax. This issue has been settled by the Supreme Court in Intercontinental Consultants Technocrats Pvt. Ltd. and the Gujarat High Court in Linde Engineering India Pvt. Ltd., holding that unbilled amounts cannot be subject to service tax. Assessee's appeal allowed.
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Commission on sales promotion services eligible for Cenvat Credit.
The appellant had rightly availed the Cenvat Credit on the amount of commission paid to its sales agent for sales promotion activity. The agent's obligations included assisting the appellant in receiving payments from buyers, providing information about tenders, market rates, and competitive possibilities, and procuring sales orders. The commission was agreed at 2% of the net invoice value, payable in US$ after receiving full payment from the customer. The adjudicating authority did not provide a reasonable explanation for denying the arrangement between the appellant and the agent for sales promotion. The allegations of suppression in the Show Cause Notice are redundant, and the extended period of limitation invoked by the Department is held to be time-barred. Consequently, the appellant is entitled to avail the Cenvat Credit on the service tax paid on foreign commission under reverse charge.
Central Excise
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Excise Duty Evasion Penalty Quashed: Director Exonerated from Manufacturing Liability.
Imposition of penalty u/r 26 of the Central Excise Rules, 2022 on the Appellant, who was the Director of Sales and Marketing of the co-noticee Company. The Respondent Department exhibited a non-responsive attitude. The case involved the interpretation of the "Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019". Despite acknowledging that the Appellant was responsible for Sales and Marketing activities, the Commissioner held the Appellant personally liable for the manufacture of goods by the Company and the evasion of excise duty. However, the CESTAT had previously set aside the penalty order against the Appellant in 2015, and no further proceedings were initiated. Additionally, even without an application under the "Sabka Vishwas Scheme", the penalty recoverable from the Appellant should be treated as "NIL" u/s 124(1)(b) of the Amended Finance Act, 2019. The charge against the Appellant imposing penalty is unsustainable in law and facts. The CESTAT allowed the appeal, stating that there exists no scope for re-adjudication.
Case Laws:
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GST
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2024 (11) TMI 380
Challenge to order whereby adjudication order was passed against the petitioner - no Appellate Forum was available due to pendency of a SPA No. 123 of 2022, Vinod Kumar Vs. State of Uttarakhand [ 2024 (10) TMI 1296 - UTTARAKHAND HIGH COURT] - It is contended by learned counsel for the State that the petitioner has already filed an appeal before the Appellate Authority against the order impugned in the present writ petition - HELD THAT:- The writ petition stands disposed-off. The Appellate Authority is directed to decide the appeal of the petitioner filed under Section 107 of the Act of 2017 against the impugned order dated 07.06.2022 (annexure no. 1), within a period of three months, from the date of production of certified copy of this order. Petition disposed off.
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2024 (11) TMI 379
Seizure order under section 129(3) of the GST Act - non-generation of e-way bill leading to penalty and interest imposition - HELD THAT:- It is admitted between the parties that the goods in question were transported along with all relevant documents, except e-way bill. It is also not in dispute that the eway bill was produced before the seizure order could be passed. The said fact is evident from the pleading before the authorities below as well as in paragraph nos. 12 13 of the writ petition, which have not been denied in the counter affidavit filed on behalf of the State. The record further shows that no finding has been recorded with the regard to intention to evade legitimate amount of tax. This Court in M/s Falguni Steels [ 2024 (1) TMI 1150 - ALLAHABAD HIGH COURT ] has taken the view that even if the e-way bill was not generated at the time of interception of goods, but the same was produced before passed the seizure order as well as in absence of any ground with regard to intention to evade payment of tax, the impugned order cannot be sustained. The impugned order dated 20.11.2020 passed by the respondent no. 5 as well as the impugned order dated 27.07.2021 passed by the respondent no. 4 under section 129(3) of the GST Act cannot be sustained in the eyes of law. The same are hereby quashed - Petition allowed.
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2024 (11) TMI 378
Levy of GST on Royalty paid by a Mineral Concession Holder for any mining concession granted by the State - Constitutional validity of N/N. 11/2017-Central Tax (Rate) dated 28.06.2017, N/N. 1/2017-Central Tax (Rate) dated 28.06.2017 (Annexure P-2), Himachal Pradesh Govt. N/N. 11/2017 dated 30.06.2017, Himachal Pradesh Govt. N/N. 1/2017 dated 30.06.2017, N/N. 27/2018-Central Tax (Rate) dated 31.12.2018 and Himachal Pradesh Govt. N/N. 27/2018 dated 31.12.2018 - HELD THAT:- It is not in dispute that the judgment rendered in INDIA CEMENT LIMITED VERSUS STATE OF TAMIL NADU [ 1989 (10) TMI 53 - SUPREME COURT] has now been overruled by Nine-Judge Bench of the Hon ble Supreme Court in MINERAL AREA DEVELOPMENT AUTHORITY ANR. VERSUS M/S STEEL AUTHORITY OF INDIA ANR ETC. [ 2024 (7) TMI 1390 - SUPREME COURT (LB)] , wherein it has been held that royalty is not a tax. Therefore, the respondents are well within their rights to levy GST on the royalty paid by the mineral concession holder for any mining concession granted by the State. The orders impugned herein i.e. notice dated 16.02.2024 (Annexure P-11) and summon dated 15.03.2024 (Annexure P-15) are upheld and the instant petition is accordingly dismissed.
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2024 (11) TMI 377
Levy of GST on Royalty paid by a Mineral Concession Holder for any mining concession granted by the State - Constitutional validity of N/N. 11/2017-Central Tax (Rate) dated 28.06.2017, N/N. 1/2017-Central Tax (Rate) dated 28.06.2017 (Annexure P-2), Himachal Pradesh Govt. N/N. 11/2017 dated 30.06.2017, Himachal Pradesh Govt. N/N. 1/2017 dated 30.06.2017, N/N. 27/2018-Central Tax (Rate) dated 31.12.2018 and Himachal Pradesh Govt. N/N. 27/2018 dated 31.12.2018 - HELD THAT:- It is not in dispute that the judgment rendered in INDIA CEMENT LIMITED VERSUS STATE OF TAMIL NADU [ 1989 (10) TMI 53 - SUPREME COURT] has now been overruled by Nine-Judge Bench of the Hon ble Supreme Court in MINERAL AREA DEVELOPMENT AUTHORITY ANR. VERSUS M/S STEEL AUTHORITY OF INDIA ANR ETC. [ 2024 (7) TMI 1390 - SUPREME COURT (LB)] , wherein it has been held that royalty is not a tax. Therefore, the respondents are well within their rights to levy GST on the royalty paid by the mineral concession holder for any mining concession granted by the State. The orders impugned herein i.e. notice dated 15.02.2024 and summon dated 15.03.2024 are upheld and the instant petition is accordingly dismissed.
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2024 (11) TMI 376
Levy of GST on Royalty paid by a Mineral Concession Holder for any mining concession granted by the State - Constitutional validity of N/N. 11/2017-Central Tax (Rate) dated 28.06.2017, N/N. 1/2017-Central Tax (Rate) dated 28.06.2017 (Annexure P-2), Himachal Pradesh Govt. N/N. 11/2017 dated 30.06.2017, Himachal Pradesh Govt. N/N. 1/2017 dated 30.06.2017, N/N. 27/2018-Central Tax (Rate) dated 31.12.2018 and Himachal Pradesh Govt. N/N. 27/2018 dated 31.12.2018 - HELD THAT:- It is not in dispute that the judgment rendered in INDIA CEMENT LIMITED VERSUS STATE OF TAMIL NADU [ 1989 (10) TMI 53 - SUPREME COURT] has now been overruled by Nine-Judge Bench of the Hon ble Supreme Court in MINERAL AREA DEVELOPMENT AUTHORITY ANR. VERSUS M/S STEEL AUTHORITY OF INDIA ANR ETC. [ 2024 (7) TMI 1390 - SUPREME COURT (LB)] , wherein it has been held that royalty is not a tax. Therefore, the respondents are well within their rights to levy GST on the royalty paid by the mineral concession holder for any mining concession granted by the State. The orders impugned herein i.e. notices (Annexure P-17) dated 15.12.2022 17), (Annexure P-19) dated 22.06.2023, (Annexure P-20) dated 12.10.2023, (Annexure P-27) dated 30.10.2023 and summons (Annexure P-26) dated 23.10.2023 are upheld and the instant petition is accordingly dismissed.
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2024 (11) TMI 375
Levy of GST on Royalty paid by a Mineral Concession Holder for any mining concession granted by the State - Constitutional validity of N/N. 11/2017-Central Tax (Rate) dated 28.06.2017, N/N. 1/2017-Central Tax (Rate) dated 28.06.2017 (Annexure P-2), Himachal Pradesh Govt. N/N. 11/2017 dated 30.06.2017, Himachal Pradesh Govt. N/N. 1/2017 dated 30.06.2017, N/N. 27/2018-Central Tax (Rate) dated 31.12.2018 and Himachal Pradesh Govt. N/N. 27/2018 dated 31.12.2018 - HELD THAT:- It is not in dispute that the judgment rendered in INDIA CEMENT LIMITED VERSUS STATE OF TAMIL NADU [ 1989 (10) TMI 53 - SUPREME COURT] has now been overruled by Nine-Judge Bench of the Hon ble Supreme Court in MINERAL AREA DEVELOPMENT AUTHORITY ANR. VERSUS M/S STEEL AUTHORITY OF INDIA ANR ETC. [ 2024 (7) TMI 1390 - SUPREME COURT (LB)] , wherein it has been held that royalty is not a tax. Therefore, the respondents are well within their rights to levy GST on the royalty paid by the mineral concession holder for any mining concession granted by the State. The orders impugned herein i.e. notices (Annexure P-15) dated 09.12.2022 (Annexure P-16) dated 09.01.2023 and summons (Annexure P-17) dated 06.01.2023 (Annexure P-18) dated 12.04.2023, are upheld and the instant petition is accordingly dismissed.
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2024 (11) TMI 374
Jurisdiction of authorities to seize goods not in transit - HELD THAT:- The issue decided by the Supreme Court in The State of Punjab Vs. M/s Shiv Enterprises and others [ 2023 (1) TMI 842 - SUPREME COURT ] where the Apex Court accordingly came to the conclusion that it is not for this Court to opine anything whether there was any evasion of tax or not while not interfering in the orders releasing the goods in question. The petition is dismissed.
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2024 (11) TMI 373
Seeking quashing of FIR - maintainability of second SCN - forgery and fraudulent acts - clandestine manufacture and supply of cement clinker and cement without issue of invoices and without accounting for the same - HELD THAT:- In the considered opinion of this Court the contention of the learned Counsel for the Petitioner that the present FIR could not have been registered as GST Act itself provides for penalties for offences under Sections 122, 132 of the GST Act cannot be accepted because the offence under GST Act would not include misappropriation of funds and conversation of those funds for the personal use of the Petitioners herein which resulted in wrongful loss to the Company and its shareholders. It, therefore, cannot be said that both the FIRs arise out of the same cause of action or that the issue raised in the second FIR, i.e. FIR No.47/2024 can be dealt with under the provisions of the GST Act. There are specific allegations in the Show Cause Notice that the sale proceeds of such clandestine supply/sale of goods were collected in cash that has been utilized for purchase of unaccounted raw material like lime stone, packing material (PP bags), jewellery, paintings and other articles and also used for meeting travel expenses etc. It is pertinent to mention that FIR No. 24/2024 is primarily regarding fabrication of documents for ousting the Complainant and other class-I heir of Late KJS Ahluwalia from the Company by forging and fabricating the documents. Whereas the present FIR pertains to misappropriation of funds of the Company for personal use - The allegation in the present FIR is regarding misappropriation of funds of the Company and any person who has interest in the company can give the information to the Police and since these allegations constitute a cognizable offence, the Police has to investigate into the allegations. Material on record also indicates that there are several proceedings pending before the NCLT regarding transfer of shares of the Company and, therefore, it cannot be said that the Complainant does not have any locus standi to initiate the proceedings under IPC. It is well settled that High Court should be slow in interfering with the criminal proceedings at the initial stage. The Apex Court in SANAPAREDDY MAHEEDHAR AND ANOTHER VERSUS STATE OF ANDHRA PRADESH AND ANOTHER [ 2007 (12) TMI 497 - SUPREME COURT ], has observed ' The High Court should not go into the merits and demerits of the allegations simply because the petitioner alleges malus animus against the author of FIR or the complainant. The High Court must also refrain from making imaginary journey in the realm of possible harassment which may be caused to the petitioner on account of investigation of FIR or complaint. Such a course will result in miscarriage of justice and would encourage those accused of committing crimes to repeat the same. However, if the High Court is satisfied that the complaint does not disclose commission of any offence or prosecution is barred by limitation or that the proceedings of criminal case would result in failure of justice, then it may exercise inherent power under Section 482 CrPC.' Thus, the powers possessed by the High Court under Section 482 of the Code are very wide and the very plenitude of the power requires great caution in its exercise. Court must be careful to see that its decision in exercise of this power is based on sound principles. The inherent power should not be exercised to stifle a legitimate prosecution. The High Court being the highest court of a State should normally refrain from giving a prima facie decision in a case where the entire facts are incomplete and hazy, more so when the evidence has not been collected and produced before the court and the issues involved, whether factual or legal, are of magnitude and cannot be seen in their true perspective without sufficient material. Of course, no hard-and-fast rule can be laid down in regard to cases in which the High Court will exercise its extraordinary jurisdiction of quashing the proceeding at any stage. The investigation is at a nascent stage. This Court is of the opinion that the second FIR, i.e. FIR No.47/2024, which is sought to be quashed is based on different set of facts and facts which have come to light after filing of FIR No. 24/2024, which are not covered in the earlier FIR. This Court is of the opinion that the scope of both the FIRs are different and only background facts in the two FIRs, which trace the history of the dispute, are common. The fact that there is some over-lap between the two FIRs does not mean that they arise out of same cause of action and, therefore, the second FIR would not be maintainable. The Petition is dismissed along with the pending application.
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2024 (11) TMI 372
Direction to petitioner to pay 5% penalty of the prevailing plot cost, for the belated period in implementation of project - HELD THAT:- As per Clause 2.1.2.(a) of O.O.No.30 of 2020 dated 31.07.2020, all the existing allottees who have completed 30 months from the date of allotment, shall be checked for minimum 50% plot utilization. If the allottees fail to have a minimum 50% of plot utilization (non-commencement of production or commencement of production with less than 50% plot utilization), deman notices for a penalty of 5% of the prevailing plot cost for the unutilized extent shall be issued on 01.10.2020. Admittedly, the petitioner complied the said clause by utilizing more than 65% of the plot. Even then as directed by this Court, the petitioner had paid the entire penalty amount. Further the petitioner had commenced its production even before raising the invoice. That apart, the pharmaceutical bulk drugs and chemicals were packed and despatched on 18.11.2022 itself, after complying with other conditions such as, QC product specification of the customer. Therefore, even before the despatch of goods, the petitioner company had started the production of the goods. Therefore, after having been paid the penalty amount to the tune of Rs. 55,66,001/- including SGST and CGST as 5% of the total cost of the plots, once against the petitioner cannot be directed to pay penalty of 5% of the prevailing plot cost. This Court finds infirmity and illegality in the impugned order passed by the first respondent and it can not be sustained and liable to be quashed. Accordingly, the impugned order dated 12.08.2023 passed by the first respondent in letter No.I/17051/2023, is hereby quashed - Petition allowed.
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2024 (11) TMI 371
Challenge to SCN demanding GST on annuity payments - Constitutional validity of Circular No.150/6/2021 GST dated 17.06.2021 - contravention to Sl. No.23-A of Notification No. 12/2017-CT(Rate) dated 28.06.2017 (as amended) and the 22nd recommendations of the GST Council - HELD THAT:- By the contents of the circular, the Entry of 23A in the Notification that the GST is exempt on service falling under Service Code 9967, by way of access to a road or a bridge on payment of annuity has been reaffirmed. Additionally, explained that the service code covers (a) supporting services in transport (b) operation services of National Highways, State Highways, Express Highways, Roads and streets, (c) bridges and tunnel operation services, by way of access to a road or bridge on payment of toll under Entry 23 of the Notification. In substance, the services enumerated in 23 and 23A for providing access to roads or bridges are exempted, whether the consideration is in the form of tolls or annuities. The clarification of the 43rd GST Council saved exemption to the service under 9967 in entry No.23A and held that the exemption does not cover any deferred/annuity payment for construction service. Therefore it has been announced that the construction of roads simplicitor is taxable service, though the payment is in full or annuity to the concessionaire. The council s reiteration preserved the exemption of the Service under the Code 9967 and enunciated that the taxable Service fall within the scope of heading 9954. A close reading of notification Nos. 12, 32 and 33 of 2017 in no way suggests that the entries 23 or 23A or 24A exempts the services under 9954 i.e. construction service of the highways, bridges, and so on - there is no intersection or overlap or contradiction of direction in the resolutions of the 22nd and the 43rd GST Council vis- -vis Notifications Nos. 12, 32 and 33 of 2017 and the impugned circular. In the present case, so many factors need determination to positively conclude the petitioner s claims and in the absence of any specific tenable ground demonstrating lack or error in the jurisdiction of the respondent department in the issuance of show cause notice or any other tenable ground necessitating interference of the Court at the stage of show cause notice and as there is also possibility of dropping the show cause notice considering the reply of the petitioner and on determination of facts, it is opined that interference at this stage is not warranted. Keeping open the claims of the petitioner to be presented before the appropriate authority and determination of contested facts, this writ petition is dismissed.
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2024 (11) TMI 370
Seeking quashing the Order-in-Original passed by the Resp-4 u/s 73 of the CGST Act, 2017 - quashing the Demand Order in GST 07 by the Resp-4 of the CGST Act, 2017 - no excess claim of ITC for the period 2019-20 as it is already denied for the period 2017-18 - HELD THAT:- A perusal of the material on record will indicate that the issue in controversy involved in the present petition is directly and squarely covered by the judgment of this Court in the case of M/S. SADHANA ENVIRO ENGINEERING SERVICES VERSUS THE JOINT COMMISSIONER OF CENTRAL TAX; THE PRINCIPAL COMMISSIONER OF CENTRAL TAX BENGALURU; UNION OF INDIA; STATE OF KARNATAKA REPRESENTED BY ITS SECRETARY, BANGALORE [ 2024 (9) TMI 1648 - KARNATAKA HIGH COURT ] where it was held that ' In view of the aforesaid amendment by inserting Section 16 (5) to the CGST / KGST Act, the present petition deserves to be disposed of relegating the parties to the original authority to implement and give effect to the said provisions after providing sufficient and reasonable opportunity to the petitioner and hearing them and proceed further in accordance with law and by issuing certain directions in this regard.' In view of the aforesaid facts and circumstances and the judgment of this Court in M/s. Sadhana Enviro Engineering s case, the present petition also deserves to be allowed and disposed of in terms of the said judgment. Petition allowed.
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Income Tax
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2024 (11) TMI 390
Determination of Turnover for presumptive taxation u/s 44AD - assessee submits that receipts cannot be treated as ancillary receipts because assessee has already offered income @ 6% of the total turnover from eligible business in totality of his business income and not on item-wise basis - HELD THAT:- CIT(A) after considering the sale bills and ledger account considered the case of the assessee regarding his turnover being genuine. So, this point is not in dispute that total turnover of the assessee during the year under consideration was Rs. 64,74,859/- and not Rs. 74,26,060/-. Calculation of turnover - We are in this view that Section 44AD of the Act is at all applicable to the case of the assessee for the relevant AY 2018-19. So far, the decisions relied upon by the CIT(A) are concerned, the said decision dealt in Section 80IB - As the present case is with regard to Section 44AD of the Act. There is a clear distinction in the facts of the decision of the Hon'ble Apex Court and the present case. As we have already discussed in our preceding paragraph that the assessee has offered tax which according to him inadvertently not offered earlier. He has already given a chart that he is ready to pay as per the provisions made u/s 44AD of the Act and offer to tax of total turnover considered for income @ 6%. We are in this view to accept the contention of the assessee and accordingly, the appeal of the assessee is allowed by setting aside the order of the ld. CIT(A) and the ld. AO. The ld. AO is directed to accept the new offered to tax as mentioned by the assessee in chart (supra) and give effect to. Appeal filed by the assessee is allowed.
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2024 (11) TMI 389
Disallowance of bogus purchases - assessee failed to prove identity of the suppliers and genuineness of such purchases claimed during the course of assessment proceedings by not producing these parties before - ITAT found that the disallowance of expenditure is not sustainable and found that the evidence and material produced by the assessee establish that it had incurred the expenditure as claimed HELD THAT:- There is no material on record to indicate that there is any serious doubt as to the physical material shown to be purchased from the four entities in question, was used by the assessee in its activities. The stock registers produced by the assessee were not rejected by the AO. It is also apparent that the assessee had established that it made payments through banking channels against the supply of materials, which were duly reflected in its stock registers. As noted by ITAT, there is no evidence to suggest that the amounts paid by the assessee for the supplies booked in its books of accounts had been returned to the assessee in a form of cash or through any accommodation entry. It is clear from the above that the controversy involved is fact-centric and revolves on the question whether, in fact, the purchases booked in the books of accounts were wholly and exclusively for the purpose of business as claimed by the assessee. The findings of the learned ITAT in this regard cannot be held to be perverse. Decided against revenue.
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2024 (11) TMI 388
Denial of TDS credit - eligibility to to get credit of the entire amount deducted as tax at source u/s. 194Q 194A - AR submitted that the assessee is only a commission agent HELD THAT:- As per case of Yagneswari General Traders [ 2024 (3) TMI 1344 - ITAT VISAKHAPATNAM] and in the case of Thota Venkateswarlu [ 2024 (8) TMI 1478 - ITAT VISAKHAPATNAM] following the principle of consistency wherein held as the assessee is acted only as an agent (kaccha arahtia) and therefore it is eligible to get credit of the entire amount deducted as tax at source and there is no short fall of TDS as concluded by the Ld. Revenue Authorities. No hesitation to set-aside the orders of the Ld. Revenue Authorities and direct the Ld. AO - CPC to grant credit of the entire amount deducted as tax at source in the case of the assessee. Appeal of the assessee is allowed.
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2024 (11) TMI 387
Validity of Assessment u/s 153C or 143(3) - search material of a third party is being used against assessee - HELD THAT:- Since the search material of a third party is being used against her, then the right course of action on the assessee would be in terms of section 153C of the Act as the date of search in the hands of the assessee differs from that of Shri Parveen Kumar Jain. This law is already settled by the decision of Jasjit Singh [ 2023 (10) TMI 572 - SUPREME COURT] in favour of the assesseeThe assessment for the Asst Year 2021-22 should have been framed only u/s 153C of the Act and not u/s 143(3) of the Act as the year of search duly varies for the assessee. Similar view was taken in the case of Raja Varshney [ 2024 (9) TMI 1625 - ITAT DELHI] which was rendered in the context of same search of Jainco Ltd on 6.1.2021. As we have no hesitation to quash the assessment framed u/s 143(3) of the Act in the hands of the assessee for the Asst Year 2021-22 - Accordingly, the additional grounds raised by the assessee are allowed.
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2024 (11) TMI 386
Penalty u/s 271(1)(c) - Surrendered income as calculated on estimated basis on unrecorded sales - HELD THAT:- We find that the above decisions of this Tribunal in Hitech Construction [ 2023 (4) TMI 741 - ITAT GUWAHATI] is squarely applicable on the facts of the case of the assessee. DR has failed to bring forth any other binding precedence in its favour before us. Under the given facts of the case we observe that the surrendered income of ₹ 5 crore was calculated on estimated basis on unrecorded sales and there is no specific incriminating material indicating the alleged income surrendered by the assessee. Surrendered income stated in the statement recorded u/s 132(4) of the Act has been offered to tax in the income tax return and the same stands accepted by the Assessing Officer. It is also noticed that the assessee had declared loss of ₹ 54.99 crore in the original return filed on 30th April, 2019 and even after surrendering the undisclosed income of ₹ 5 crores, the ld. AO has accepted the income of the assessee at a loss of ₹ 44.99 crore. No infirmity in the finding of the CIT (A) deleting the impugned penalty u/s 271(1)(c) of the Act on duly examining the facts of the case in light of the settled judicial precedence. The sole ground of appeal raised by the Revenue is dismissed.
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2024 (11) TMI 385
Validity of the assessment order u/s 144/147 - addition made by the AO on account of Long Term Capital Gain invoking S.50C on Agricultural lands - HELD THAT:- Assessee has furnished the details but the same has not been considered merely the same was filed late on 02.11.2023 by the assessee but before the decision is rendered on 29.11.2023. The bench also noted that the ld. CIT(A) has not dealt with the fact that the addition was made in the case of the mother of the assessee for the full amount of consideration and the property was sold by the father of the assessee. These facts are narrated of the assessment order thus cannot be disputed by the revenue. Therefore, the contention of the CIT(A) is not correct and prejudicial to the interest of the assessee and the revenue has to tax the correct income and in correct hand. As is also evident that the order of the assessment in fact passed u/s 144 of the Act and the contention raised by the assessee needs to be appreciated based on the evidence placed on record by the assessee before the ld. CIT(A). Considering that peculiar aspect of the matter we deem it fit to remand the matter to the file of the ld. AO who will considered the factual aspect of the matter as raised by the assessee after due verification of the facts and charge the correct income in hands of the assessee after affording due opportunity to the assessee. However, the assessee will not seek any adjournment on frivolous ground and remain cooperative during proceedings before the ld. AO. Restore the matter back to the file of the ld. AO shall in no way be construed as having any reflection or expression on the merits of the dispute.
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2024 (11) TMI 384
GP estimation - estimation of the percentage of profit that is to be applied in the case of the assessee based on the facts that the assessee has disclosed the turnover which is not matching with that of the form no. 26AS - AO applied the profit at the rate of 8%, CIT(A) considering the past order in the case of the assessee estimated at 7% HELD THAT:- As the assessee has already disclosed @ 5.99 % there is no need to further add the estimation of profit and moreover the profit of the Sri Lanka project for which the dispute is raised the profit of which is also forms part of the total profit declared by the assessee. Appeal of the assessee is allowed.
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2024 (11) TMI 383
Revision u/s 263 - deduction allowed u/s 54EC 54F by the AO was erroneous in so far as it was prejudicial to the interest of revenue - HELD THAT:- The assessee had entered into joint development agreement with M/s R.K. Construction on 10.02.2012 for a total consideration of Rs. 1,95,00,000/- along with 8 flats and 8 car parks upon construction. The total consideration therefore, was not only Rs. 1,95,00,000/- but the fair market value of the 8 flats and car park which the assessee was to receive from the developer. Instead of showing capital gain in the year of transfer i.e. AY 2012-13, the assessee showed capital gains of Rs. 38,00,000/- in AY 2013-14 and Rs. 24,00,000/- in AY 2014-15 which is not in accordance with the provisions of the Act relating to computation of capital gains. The capital gains is to be computed in the year of transfer, which was AY 2012-13 and after reducing the cost of acquisition. The cost of acquisition in the case of gifted property is governed by section 49(1) of the Act. Since, the agreement dated 03.11.2011 and the subsequent unregistered agreement dated 10.02.2012 with M/s R.K. Construction, a proprietary concern of Dr. Malaya Mukherjee, could not materialise, therefore, subsequently the assessee entered into another joint development agreement with M/s Tanvee Green City (P) Ltd. on 26.09.2014 which was a registered development agreement. The powers of attorney were also issued in the name of the directors of the company for getting all the formalities completed. The developer adjusted the amount of Rs. 62,00,000/- received by the assessee earlier and accordingly, the assessee was to receive only the balance of Rs. 1,00,00,000/- along with one flat and one car par. The total consideration was therefore, Rs. 1,62,00,000/- plus market value of one flat and one car park from which the cost of land owned by the assessee, which was gifted to him by his mother was to be deducted to arrive at the capital gains, which was assessable in AY 2015-16. The assessee contends that if the transfer is considered in AY 2013-14 then there is no discussion regarding the taxation of Rs. 90,00,000/- received in AY 2015-16 by the Ld. PCIT. Since the second registered agreement and the balance payment was received from M/s Tanvee Green City (P) Ltd., therefore, the Ld. PCIT was not correct in holding that claiming and allowing the date of transfer as the date of registration was not in order for availing exemption u/s 54EC and 54F in FY 2014-15. AO allowed the claim of deduction u/s 54EC but disallowed the claim of deduction u/s 54F of Rs. 43,00,000/- since as per the Inspector s report, the residential house was not completed till date and he had also added the sum of Rs. 10,00,00,000/- on account of difference in market value for development agreement and computation of income. The assessee had shown capital gains being the instalment of sale proceeds received in AY 2013-14 and 2014-15 at Rs. 38,00,000/- and Rs. 24,00,000/- respectively, which was not correct. It has been judicially held that income is to be assessed in the correct AY and since the unregistered joint development agreement with M/s R.K. Construction could not materialise and another JDA with M/s Tanvee Green City (P) Ltd. was executed, the capital gains was chargeable only in AY 2015-16 and not in the earlier assessment year(s). Accordingly, the order of the Ld. PCIT is modified and the appeal of the assessee is partly allowed.
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2024 (11) TMI 382
Denial of exemption u/s 11 - delay in filing of audit report in form 10B - HELD THAT:- As relying on case Manav Seva Trust [ 2024 (8) TMI 1476 - ITAT KOLKATA and Bangarh Educational Welfare Trust [ 2022 (1) TMI 1321 - ITAT KOLKATA] we hereby hold that since filing of audit report is procedural requirement and assessee has e-filed the report post prescribed due date and delay was on account of technical glitches, therefore, condone the delay in filing of audit report on form 10B and direct the jurisdictional AO to give benefit of Section 11 of the Act if the assessee is otherwise found eligible - Appeal of the assessee is allowed.
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2024 (11) TMI 381
Denial of TDS credit on salary - employer of the Assessee has not reflected the TDS in Form No.26AS - Assessee mainly claimed that employer of Assessee in fact, not provided Form No.16 - as per assessee if the employer has deducted TDS on salary u/s.192 and may not have deposited the same in the Government Treasury, then also, the Assessee is entitled to get the claim of TDS as the Assessee cannot be denied the benefit of TDS which is benevolent in nature HELD THAT:- No doubt, the contention raised by the Assessee seems to be reasonable and logical, however, Assessee is required to discharge its primary onus by producing relevant documents, then only, can claim the right in its right perspective. We observe that the Assessee by filing TDS working which is though initialed by somebody but the same is neither on proper letter head nor there is a name of the person who signed such document and even otherwise, the Assessee has also failed to file any document, wherefrom it can be reflected that the Assessee has received any particular amount of salary on which TDS has been deducted and therefore, in absence of relevant documents, Commissioner correctly held that the AO has not made any mistake in non-granting of credit of TDS, since, the Assessee did not furnish any salary slip or Form No.16. We also observe that in the aforesaid case i.e. Chandrashekhar Sadashiv Potphode (supra) the Assessee was able to prima facie establish its case by producing relevant documents, whereas in this case the Assessee has failed to do so. We by considering peculiar facts and circumstances of the case, observe that in absence of relevant documents, the issue remained to be adjudicated properly and in its right perspective and therefore, for proper and just decision of the case and for the end of the justice, we deem it appropriate to remand the instant case to the file of the Ld. Commissioner for decision afresh.
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2024 (11) TMI 369
Provisional attachment orders u/s 281B - absence of extension of provisional attachment orders - HELD THAT:- In the present case, the attachment orders were passed in terms of Section 281B (1) of the Act on 10.01.2024 and the said orders will be in existence for a period of six months in terms of Section 281B(2) of the Act. The respondents are empowered to extend the said provisional attachment orders for further period of two years by virtue of proviso to sub-section (2) of Section 281B of the Act. In the present case, admittedly, no such extension order has been passed before the expiry of the original provisional attachment orders dated 10.01.2024. Therefore, the said order would cease to have effect after expiry of the period of six months from the date of provisional attachment orders dated 10.01.2024. As rightly contended by the learned Senior Counsel for the petitioner, the period of six months from the date of impugned provisional attachment dated 10.01.2024, has been elapsed on 10.07.2024. Admittedly in the present case, after the expiry of six months of original provisional attachment orders in terms of Section 281B(2) of the Act, no further extension was made in terms of proviso to Sub-clause (2) of Section 281B of the Act. In the absence of any extension, the original provisional attachment orders dated 10.01.2024, shall cease to have effect after the period of six months, that is, from 10.07.2024 onwards, the said order has been ceased to have effect. Therefore, once the attachment order is ceased to have effect, the question of continuation of provisional attachment orders does not arise unless and otherwise, the Department extends the same in terms of proviso to Sub Section (2) of Section 281B. In the absence of extension of provisional attachment orders dated 10.01.2024, the same should ceased to have effect from 10.07.2024 onwards, i.e. after expiry of six months period. Of course, the original interim order granted by this Court, dated 15.02.2024 would continue as long as the impugned provisional attachment order is in existence.
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2024 (11) TMI 368
Revision u/s 263 - AO had not conducted the necessary inquiries and verified the facts for accepting the assessee s claim that its income was not chargeable to tax under the Act by virtue of the DTAA - HELD THAT:- A plain reading of the SCN indicates that the CIT had called upon the petitioner to show cause why the proceedings u/s 263 of the Act not be taken in view of what was stated to be the failure on part of the AO to conduct the necessary enquiries. CIT had faulted the AO for not undertaking certain enquiries including verifying whether the assessee has a PE in India; whether in terms of Section 9(1)(vii) of the Act, the income is chargeable as fees for technical services (FTS); whether TDS at the rate of 10% on all the remittances made to the assessee were deducted; whether the condition as set out in Article 12 of the DTAA in regard to taxation of FTS were satisfied. In a similar vein, the learned CIT had also faulted the AO for not making enquiries regarding the commercial substance of the assessee in Singapore and whether it was a conduit company form for obtaining the tax benefits under the DTAA. The said observations were made only for the purposes of calling upon the assessee to show cause why the proceedings not be initiated u/s 263 of the Act. However, thereafter, the learned CIT had not put the issue regarding treaty shopping to the assessee. Undisputedly, the tentative opinion formed by the learned CIT that the assessee was a conduit company for the reasons as articulated in the order dated 25.03.2022, was not put to the assessee. Clearly in the circumstances, the assessee had not given any opportunity to satisfy the learned CIT regarding its view, which has found its way in the aforesaid order of the learned CIT s conclusion. We are unable to find any fault with the decision of ITAT in setting aside the order dated 25.03.2022 on the ground that the assessee was not afforded an opportunity to counter the allegation that it was a conduit company without any substance.
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2024 (11) TMI 367
Delay of 35 days in filing the appeal before CIT(A) - CIT(A) dismissed the Appeal filed by the Assessee on the grounds of delay in latches - HELD THAT:- In our opinion, the Assessee has explained the sufficient reason for condoning the delay of 35 days in filing the Appeal before the Ld. CIT(A). CIT(A) ought to have condoned the delay of 35 days in filing the Appeal and should have decided the Appeal on its merits. Thus, we condone the delay of 35 days in filing the Appeal before the CIT(A) and restore the matter to the file of the Ld. CIT(A) to decide the Appeal of the Assessee
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2024 (11) TMI 366
Penalty u/s 271(1)(c) - addition pertaining to the alleged bogus purchases - AO has added 100% value of bogus purchases but CIT(A) has restricted the addition to the extent of 12.5% - HELD THAT:- Addition has been sustained by the Ld.CIT(A) on estimated basis. As decided in KRISHI TYRE RETREADING AND RUBBER INDUSTRIES [ 2014 (2) TMI 21 - RAJASTHAN HIGH COURT] penalty u/s. 271(1)(c) of the Act is not leviable when the addition is made on estimation basis. Accordingly, we hold that the penalty u/s. 271(1)(c) of the Act is not leviable in the present cases - Also see SANGRUR VANASPATI MILLS LTD. [ 2008 (2) TMI 285 - PUNJAB AND HARYANA HIGH COURT] and JATIN ENTERPRISES case [ 2024 (3) TMI 1073 - ITAT MUMBAI] - Decided in favour of assessee.
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2024 (11) TMI 365
Bogus LTCG on accommodation entries - deductions u/s 10(38) denied - AO observed that assessee had made huge profit out of this investment because of this, it makes the script as suspicious and penny stock - HELD THAT:- The assessee has purchased the shares directly from the company and through share transfer from other party, subsequently, sold the same in the stock exchange. However, there are no discrepancies in the documents filed by the assessee claiming the deductions u/s 10(38) of the Act. At the same time, even though all the characteristics of the penny stock exists in the present case, still the revenue has not brought on record any materials linking the assessee in any of the dubious transactions relating to entry, price rigging or exit providers. Even in the SEBI report, there is no mention or reference to the involvement of the assessee. We can only presume that the assessee is one of the beneficiaries in these transactions merely as an investor who has entered in investment fray to make quick profit. Even the Assessing Officer has applied the presumptions and concept of human probabilities to make the additions without their being any material against the assessee. AO and CIT(A) has applied the concept of human probabilities and held the above said scrips to be a penny stock without bringing on record how the assessee is involved in any of the scrupulous activities or directly linked to one of the person who has involved in manipulation/rigging of share prices, entry operator or exit provider as observed in the case of Ziauddin A Siddique [ 2022 (3) TMI 1437 - BOMBAY HIGH COURT ] Therefore, there is no material with the tax authorities to substantiate their findings that the impugned transaction is non-genuine - Decided in favour of assessee.
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2024 (11) TMI 364
Taxability of income earned from sale of software license as business income - Income deemed to accrue or arise in India - assessee is a non-resident corporate entity incorporated in Austria - AO proceeded to compute the profit in relation to sale of software licenses by estimating at 15% and brought such profit to tax by applying the rate of 40% in both the assessment years under dispute - primary allegation of the AO is to the effect that the assessee is not the economic owner of the IPs as majority of them have been registered outside Austria and mostly in USA and further the assessee has not incurred any expenditure for developing such IPs HELD THAT:- Assessee has brought to our notice the financial statements of the assessee, which reveal that the assessee has earned substantial revenue from its operations in different geographical jurisdictions, including Austria. The assessee also files its tax returns regularly in Austria and has been assessed to tax by the Austrian Revenue Authorities. Copies of the assessment orders clearly establish the aforesaid factual position. The financial statement further reveal that the assessee has incurred expenditure in Research and Development (R D) segment towards employee cost and other R D. Receipts from sale of software licenses in India formed a very small part of the total revenue earned by the assessee from its operations. Therefore, the allegation of the department that the assessee has entered into treaty shopping arrangement to escape taxation, is without any credible reasoning and merely based on conjectures and surmises rather than corroborative evidence. Allegation of the AO that the assessee has been incorporated in Austria as part of treaty shopping arrangement to avoid taxation in USA , in our view, is totally irrelevant and should not have bothered the Assessing Officer. In any case of the matter, there cannot be any manner of doubt that the Revenue earned from sale of software licenses could not have been taxed as royalty income in India in view of the ratio laid down in case of Engineering Analysis Centre of Excellence Pvt. Ltd. [ 2021 (3) TMI 138 - SUPREME COURT ] and various other judicial precedents. Therefore, it is immaterial whether the assessee is located in Austria or USA. Even, assuming that in place of assessee, the entity earning revenue from sale of software licenses would have been located in USA, still, the revenue earned would not have been taxable in India as royalty income, in view of the law laid down by the Hon ble Supreme Court. Therefore, the receipts in dispute would not have been taxable in India, irrespective of the jurisdiction where the entity earning Revenue from sale of software is located. Whether the assessee has been set up in Austria to avoid tax liability in USA is a matter which should concern the tax authorities in USA and not the Assessing Officer in India. There is no mandate on the AO in India to take up cudgel on behalf of the USA tax authorities. There is nothing on record to suggest that the USA tax authorities or tax authorities of other overseas jurisdictions have raised any dispute regarding the genuineness of assessee company and the status of its tax residency. When other tax jurisdictions including USA have not raised any doubt regarding the tax residency of the assessee, in our view, the AO in India cannot question the tax residency of the assessee, that too, in absence of any corroborative evidence to establish any fraud or illegal activity of the assessee. Thus, Assessing Officer could not have doubted the tax residency and the genuineness of the assessee company in the teeth of the TRC issued by the Austrian tax authorities. Insofar as reference to BEPS Action Plan by the Assessing Officer is concerned, as held by the coordinate Bench in case of Additional Director of Income Tax Vs. Bakers Hughes (Singapore) Pte. Ltd. [ 2015 (5) TMI 582 - ITAT DELHI ] it cannot have a role in judicial decision-making process. That too, in absence of any material brought on record by the Assessing Officer to conclusively establish that the assessee has no commercial or economic substance. Merely because, majority of the IPs are registered in different jurisdictions, that by itself would not divest the ownership rights of the assessee over the IPs. No evidence has been brought on record by the Departmental authorities to demonstrate that revenue earned by the assessee has been repatriated to either the parent company or any other related party. Thus, we hold that the assessee is entitled to the benefits under India Austria DTAA. Once the receipts from sale of software licenses are held as business income, they cannot be taxed in India in absence of PE. Accordingly, we direct the Assessing Officer to delete the additions. In view of our decision above, we refrain from examining as to whether the receipts are taxable under section 9(1)(i) through business connection. Assessee appeal allowed.
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2024 (11) TMI 363
Expenses claimed against the Capital gains - AO disallowed administration expenses claimed by the assessee as not genuine and excessive - HELD THAT:- After careful consideration of the facts on record, we observed that the assessee is dealing in the business of shares and securities, the monitoring of such securities, the assessee has to incur certain expenses on PMS. Therefore, this expenditure is directly relating to the securities transaction. The nature of transaction demands such expenditures, therefore, on the similar facts on record, the ITAT Pune has considered the same and allowed such expenses. After careful consideration of findings of CIT(A), he has decided the issue in favour of the assessee and he has also considered the conflicting decisions and came to conclusion based on decision of Vegetable Product [ 1973 (1) TMI 1 - SUPREME COURT ] The decision of Ld CIT(A) is reasonable findings on the issue of allowability of PMS expenses. Therefore, we are not inclined to disturb the same. Disallowance of General administrative expenses - assessee has incurred these expenditure on salaries, administration, depreciation etc - HELD THAT:- The income tax provisions allows the assessee s to compute the income under different heads of income and the assessee is allowed to claim the expenses based on the relevant heads of income. In the given case, the assessee can claim the general expenses of running the business only under the head business income. Even there is no income declared under the head business income, the assessee is allowed to claim these expenses as business expenditure, if there is no business income, the assessee is allowed to carry forward the same in case the assessee does not have income under other heads of income other than loss under the head Capital Gains. Since the assessee has declared profit under the head Capital Gains, the assessee is allowed to adjust the same u/s 71 - Hence, the above said expenses cannot be claimed under the head Capital Gains u/s 48 of the Act. Therefore we are inclined to decide the issue of claim of administration expenses in favour of the revenue. Ultimately, the assessee may get the benefit of claim of these expenses as business expenditure under the head business income. As such there is no impact for the same in this AY Treating transaction entry with the assessee as business transaction - We observed that the assessee has classified the investments made in the various shares including HCL shares for the purpose of investment only. The various circulars issued by the CBDT allows the assessee to choose the method of accounting relating to dealing in securities transactions either on the line of treating the same under the head business income or Capital Gain depending upon the treatment of various shares for the purpose of pure investment or not. Whatever the method adopted by the assessee, the same has to be followed consistently. The ld CIT(A) has considered the various circulars particularly Circular no 6/2016 dated 29.02.2016, which has settled the issues under consideration. Therefore we do not see any reason to disturb the findings of ld CIT(A). Therefore, we are inclined to dismiss the ground no.2 raised by the revenue. Bogus Loss on purchase and sale of shares - introduction of unaccounted money (difference between the purchase and sale price) without suffering any tax - assessee submitted that assessee has sold these shares on distress - HELD THAT:- Assessee has entered into agreement with the management of PDK to investment in their company. He presumed or expected to invest to the extent of 51% of total shareholding. He invested in their shares @ Rs. 100 per share including share premium. However, as per the submissions made before us, it was claimed that the management of PDK has refused to allow him to invest to the extent of 51%. Due to the above disagreement, the assessee has to disinvest the same at much lower price of Rs. 40/- per share to one of the existing Director of the same PDK group. In support of the above submissions, the assessee has filed certain communications from 07.04.2023 to 07.07.2023. We are not able to understand, why the dispute has to be settled with in such short period of time and also to reduce the sale price from Rs. 100 to Rs. 40 per share. There is not substance to show why he has agreed to invest Rs. 100/- per share in first place and also to reduce the share price to sell the same shares to one of the directors of PDK and sell the shares at such huge loss. The whole transaction entered by the assessee does not display any prudence and the explanations offered to exit the project does not impress us. Decided against assessee.
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2024 (11) TMI 362
Penalty u/s 271(1)(c) - Addition made u/s 50C on difference between the stamp duty value and sale consideration as deemed income of the assessee and addition on account of negative cash in the books Addition u/s 50C - HELD THAT:- Question as to whether the penalty u/s 271(1)(c) of the Act could be levied on this kind of addition made on account of deeming fiction came to be examined in the case Madan Teatres Ltd. [ 2013 (6) TMI 96 - CALCUTTA HIGH COURT ] wherein it was held that the addition made on account of deeming fiction would not lead to levy of penalty u/s 271(1)(c) of the Act, when the assessee has not actually received any money over and above the sale consideration declared in the sale deed. The facts prevailing in this case are identical with the facts of the above said case. There is no finding that the assessee has actually received any money over and above the actual sale consideration declared in the sale deed. Accordingly, the impugned addition has been made on account of deeming fiction only and penalty u/s 271(1)(c) of the Act is not leviable. Penalty levied on negative cash balance found in the books of account - We notice that the assessee could not offer any explanation with regard to the cash deposited into the bank account over and above the cash balance available in the books of account. As held in the case of MAK Data P. Ltd. [ 2013 (1) TMI 574 - DELHI HIGH COURT ] that voluntary disclosure does not release the assessee from mischief of penalty proceedings u/s 271(1)(c) of the Act. However, in this case, the surrender was after being found out that there was negative cash balance. Hence, it cannot be said that it was a case of voluntary surrender of income. Hence, it is a clear case of warranting addition. penalty u/s 271(1)(c) of the Act was rightly levied by the AO and confirmed by the Ld. CIT(A). Decided partly in favour of assessee.
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2024 (11) TMI 361
Taxability of interconnectivity usage charges received by the assessee from Vodafone, an Indian entity - Receipts can be considered as FTS or alternatively as other income - DRP recharacterized the interconnectivity usage charges as FTS both under the domestic law as well as the treaty provisions - HELD THAT:- If we proceed to analyze the nature of services provided by the assessee to the Indian entity, it can be seen that such services were provided without any human intervention at any stage. The roaming services and termination of international voice traffic services were provided by the assessee using its own system located outside Indian and the entire process of providing such services is fully automated without any human element involved therein. DRP has acknowledged the fact that the interconnectivity usage involves high degree of machines powered by sophisticated software. Thus, the facts on record clearly indicate that the assessee has provided the services to the Indian entity through a standard facility and system set up by it, which is fully automated. In case of CIT Vs. Bhari Cellular Limited [ 2008 (10) TMI 321 - DELHI HIGH COURT] while deciding identical nature of dispute has held that the expression technical services as used in Explanation 2 to section 9(1)(vii) takes colour from the expression managerial and consultancy services , which necessarily involve a human element or human interface. The Hon ble Court proceeded further to hold that the interconnect/port access facility is only a facility to use the gateway and the network of service provider. Hence, such service provider does not provide any assistance or aid or help to the service recipient in managing, operating and setting up their infrastructure and network. While interpreting the expression technical services it cannot be construed in the abstract and general sense but in the narrower sense as circumscribed by the expression managerial service and consultancy service as appearing in Explanation 2 to section 9(1)(vii) of the Act, which requires rendition of service through human interface. Thus, we hold that the receipts towards interconnectivity usage charges cannot be treated as FTS. Whether the receipts can be treated as other income under section 56 of the Act and under Article 24 of India Oman DTAA? - The departmental authorities themselves were not sure regarding the true nature and character of the receipts. Merely, because a particular item of income cannot be treated as royalty or FTS, as such, receipts may not fit into the definition of royalty/FTS provided under the Treaty, that by itself would not make it taxable under the residual clause of the treaty. It needs to be seen, whether such income can come within the ambit of any other Article preceding Article 24 of the Treaty. Undisputedly, the roaming and termination of international voice traffic services were provided by the assessee in course of its regular business activities. Hence, it cannot be said that provision of such facility is not connected to assessee s business activity. That being the factual position on record, the interconnectivity usage charges have to be treated as business income, hence covered under Article 7 of India Oman DTAA. However, since, the assessee did not have any Permanent Establishment (PE) in India, the business profit has to be taxed in the country of residence in Oman. Merely, because the income is not taxable in India under a particular head due to beneficial provisions under the Treaty, it cannot automatically lose its character, as in the present case, and made taxable as other income. Thus, interconnectivity usage charges received by the assessee are not taxable in India, either as FTS or as other income. Assessee appeal allowed.
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2024 (11) TMI 360
Assessment u/s 153C v/s 143 - Additions u/s 45 - under reporting of sale consideration of immovable property while framing the Assessment Order un/s 143(3) - whether the Assessment Order passed by the AO u/s 143(3) of the Act is illegal and not maintainable in view of the specific provisions of Section 153C? HELD THAT:- As observed from case records, a search action under Section 132 of the Act was carried out at the premises of Praveen K. Jain Group (searched person) on 06.01.2022. Pursuant to search, document seized from the premises of Praveen K. Jain was received by the AO of the assessee on 03.10.2022. The Assessing Officer has also recorded 'Satisfaction Note' under Section 153C. In view of express satisfaction note recorded u/s 153C of the Act for different Assessment Years including Assessment Year 2021-22 in question, the proceedings initiated under Section 143(2) of the Act for regular assessment requires to be abated and give way to the special provisions of Section 153C of the Act. Similar issue came up for adjudication in Akansha Gupta [ 2024 (7) TMI 1133 - ITAT DELHI] wherein the assessment framed under Section 143(3) of the Act were quashed. Thus, having regard to the scheme of the Act for assessment of person other than searched person codified under Section 153C of the Act, we find substantial force in the plea of the assessee. Assessment Order passed u/s 143(3) of the Act for A.Y. 2021-22 in question giving rise to the present appeal stands quashed. Decided in favour of assessee.
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2024 (11) TMI 359
Fraudulent transaction resulting into non-genuine loss - Commission on impugned illiquid option trades - materials available under the project falcon available on ITBA portal wherein there was some statement of Shri Arun Shah, Director of one of the share broking firm wherein he has admitted that in such kind of accommodation entries an unaccounted commission amounting to 2% on the buy and sell are received or paid - CIT(A) Reduced the percentage to 0.25% from 2% - HELD THAT:- The entire basis of the ld. AO is based on Project Falcon report passed on by the Investigation wing which admittedly pertains to stock option trading carried out on the Bombay Stock Exchange, which has no connection with the assessee as assessee trading was in currency options in United Stock Exchange and it has carried out various opportunities in which assessee had shown profit. All those trades in which assessee disclosed profit has not been disturbed or adversely viewed except for few transactions of losses. For instance in A.Y.2 014-15 there were 11 trades in United Exchange segment, some in futures and some in options, out of which only two trades of currency options have been alleged by the ld. AO. Similarly, in A.Y. 2015-16, the alleged trades in question which were executed in April 2014. The assessee had declared trading profit of Rs. 6,72,64,310/- in A.Y.2014-15 and the alleged non-genuine loss which has been picked up by the ld. AO is only Rs. 7,20,400/-. AO has just misinterpreted the Report to apply in assessee s case without independent analyzing the transactions. At least ld. AO should have conducted some enquiry qua these transactions on which assessee had claimed loss instead of blindly relying upon the Project Falcon report which has nothing to do with trades in USE. Once the transactions are based on screen based electronic trading and the identities of the buyers and sellers are not displayed, then to presume that the transactions have been manipulated are non-genuine cannot be upheld. Thus, prima facie, there is no material that trade transactions in which assessee had incurred losses (that is, in two transactions) is non-genuine especially when assessee had declared huge profit and income from such trade in similar transactions, which has not been doubted. There has to be basis and inquiry to arrive to any conclusion that out of many transactions, few were manipulated to show fictitious loss and were non-genuine. Accordingly, the additions on account of nongenuine loss and illiquid options are deleted. Addition of commission u/s. 69C for non-genuine losses - As it is seen that same is based on statement of Shri Arun Shah of M/s. Aryav Securities allegedly recorded in the course of Porject Falcom . However, nowhere in such statement there is any reference of the trade carried out by the assessee or involvement of the assessee. Further, if such statement was to be relied, then law provides that same should have been confronted with the assessee to rebut or cross examine. Ultimately, the addition has been sustained by applying adhoc commission rate of 2% which has been scaled down to 0.25% by the ld. CIT (A) that assessee might have incurred such expenditure in cash. There is no evidence brought on record that assessee had actually paid such expenses outside the books and the entire addition is based on conjecture. In any case we have already held that the transactions in which assessee has incurred loss are genuine, therefore, there is no question of imputing any kind of adhoc commission. Bogus sales/purchase or accommodation entry - It is not a case where the entire purchases have been added, albeit ld. AO has presumed that assessee might have earned commission on such purchases made from non-genuine parties. Accordingly, such adhoc application of commission of 0.25% is deleted.
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2024 (11) TMI 358
Non deducted the TDS on payments pertaining to the Agency services - CIT(A) found that the TDS was deducted u/s 194C - HELD THAT:- AR submitted that the relevant clause 23 of the Form.No.3CD pertains to reporting of particulars of payment made to specified persons u/sec40A(2)(b) of the Act and demonstrated the Form.No.3CD and in particular at Page 23 - clause no 23 along with Annexure D, where the details of payments made to the partner M/s Capricon logistics Pvt Lt is mentioned and TDS was also deducted on the quantum of the Agency services u/sec194C We find the CIT(A) has dealt on the facts, provisions of Act, submissions of the assessee and the clause 23 of the Tax Audit Report Form. No 3CD to clear the wrong observations of the AO. Further the said clause relate to reporting of particulars of payments made to specified persons u/sec 40A(2)(b) of the Act and the assessee has reported the payments made to one of the partner M/s Capricon logistics Pvt Lt in the F.Y.2013-14. CIT(A) has considered these factual information and passed a reasoned order. Accordingly, we do not find any infirmity in the order of the CIT(A) and uphold the same and dismiss the grounds of appeal of the revenue.
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2024 (11) TMI 357
Nature of receipts - receipts of development fund - capital receipt/corpus donation, or revenue receipt - HELD THAT:- In the present case, the development fund is received from the students apart from the tuition fees. The development fees are received with the clear understanding that it is to be utilized for creation of capital asset necessary for achieving the object of the society. Therefore, the development fees received during the year is directly credited to development fund account and not routed through the Income Expenditure A/c. The development fund is used in creating construction of school building/creation of infrastructure. Development fees is utilized in creation of capital asset and therefore the same cannot be treated as revenue receipt. In earlier years also, such development fees is accepted by the AO in assessment completed u/s 143(3) as capital receipt. Litmus test of charitable institution - In ACIT vs. JSS Mahavidhyapeetha [ 2013 (4) TMI 761 - ITAT BANGALORE ] as stated that the litmus test of charitable institution is the application of funds and not the colour of the contribution. It has stated that the question whether the donations are voluntarily or not becomes irrelevant and what becomes relevant is the application of such contributions on the objects of the trust which are admittedly charitable. If the developer fees is used for the purpose of creating infrastructure then the same would be treated as a capital receipt. We concur with the findings of the ld. CIT(A) who has rightly held development fund is a capital receipt and would not be added to the gross receipt in the Income Expenditure Account. Denial of exemption u/s 11 - advance given to staff and sister concern amounts to the misappropriation of funds - CIT(A) deleted addition - HELD THAT:- CIT(A) held that an amount is amount advanced to supplier/contractor/old staff which cannot be considered as an investment. The remaining amount is advance given to other educational institutions which cannot be considered as investment or deposit and thus the question of their falling within the modes prescribed u/s 11(5) do not arise and consequently provisions of section 13(1)(d) are also not applicable. Accordingly, the addition made by the AO was deleted. The Bench has take into consideration the submissions of both the parties and also noted the relevant observations as made by the CIT(A) that the AO has not recorded any finding that the sums of money were given interest free out of the borrowed funds on which interest is payable by the appellant. This is not the issue in the present case Regarding the propriety of giving non interest bearing loans to other institutions the fact is that all the institutions to whom the loans are given are also registered u/s 12AA and are within the control of the same management as the appellant and hence it cannot be said that they are part of any tax avoidance mechanism or scheme by transferring tax exempt funds to non- tax exempt entities. From this observation of the CIT(A) and also the decisions mentioned hereinabove by the assessee, the Bench finds that there is no error in the order of the ld. CIT(A) and thus the Ground No. 4 5 of the Department are dismissed. Rejection of books of accounts u/s 145(3) - adhoc disallowance made by the AO at 20% and partly confirmed at 10% by the ld.CIT(A) - HELD THAT:- We note that the ratio of expenses to the receipt has declined to 85.87% as compared to 87.04% in A.Y. 2011-12 and 88.96% in A.Y. 2010-11. Further the above expenditure includes audit fee, building rent expenses, depreciation, electricity water expenses, ESI PF contribution, PF administration charges, salary expenses and supervision charges which is paid by cheque or otherwise not claimed by the assessee. After excluding this amount the expenditure claimed by the assessee. These expenses are otherwise reasonable considering the comparative expenses incurred in previous year which has been accepted by the AO in the earlier assessment orders framed u/s 143(3) of the Act. Hence, the adhoc disallowance of 20% made by the AO which was restricted to 10% by Ld. CIT(A). Considering details of expenses as narrated in the table and also the case laws cited by the ld. AR of the assessee, we do not concur with the findings of the ld.CIT(A).
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2024 (11) TMI 356
Disallowance of the deduction claimed on account of lease rentals - Whether allowable revenue expenditure, being paid by Appellant to the owner of the leased assets for using those leased assets for the purpose of its business? - HELD THAT:- We find merit in the submission of the Ld. AR. Here in this case, the genuineness of lease rent has not been questioned by the authorities below. The reasoning for the disallowance is only that the same has not been debited in the books of accounts. Undisputedly, this claim has been made in the ITR in the computation of income. As relying on Kedarnath Jute Mills Ltd. [ 1971 (8) TMI 10 - SUPREME COURT ] we are of the considered view that the lease rent upheld by the Ld. CIT(A) is allowable expenditure. Decided in favour of assessee. Disallowance of bogus conveyance telephone expenses - HELD THAT:- Since nothing has been brought on the record by the Ld. AR to controvert and demonstrate that the finding of the CIT(A) is erroneous and needs interference. We therefore, in view of the facts of the case, do not find it fit to interfere with the finding of the CIT(A). This ground thus stands dismissed. Taxability of sundry creditor - AR contended that the section 41(1) of the Act did not empower the AO to write off the sundry creditors - HELD THAT:- The sundry creditors are in the nature of credits in the Books of account and it is the duty of the appellant/assessee to explain and demonstrate the genuineness of sundry creditors, if questioned. The appellant/assessee is further required to controvert the finding of the CIT(A). It cannot be ruled out that these liabilities had not been disposed of earlier through cash or otherwise. The idle/unaltered/static sundry creditors, in particular, require verification/investigation. Appellant/assessee deserves reasonable opportunity of being heard to make shortcomings or non-compliances. In view thereof, without offering any comment on merit of this issue, we deem it fit to set aside the finding of the CIT(A) in this regard and remit this matter back to the file of the AO for de-novo consideration. Appellant/assessee should ensure compliances during the set-aside proceeding before the AO. AO is also required to provide reasonable opportunities of being heard to the appellant/assessee before deciding this issue on merit. Disallowance u/s 40(a)(ia) - AR submitted that the expenditure disallowed and offered for tax in earlier years due to the TDS default were claimed as expenditure after payment of TDS thereon in the relevant year - HELD THAT:- We find merit in the argument of the DR that it needs verification. We therefore, direct the AO to verify that whether the sum claimed as deduction in the relevant year has ever been offered for tax in earlier years and whether it is a case of late deposit of TDS or otherwise, etc. In case the same had been offered for tax in earlier year and it fulfills all the terms conditions for allowability in the relevant year as per the law, the same has to be allowed accordingly.
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2024 (11) TMI 355
Penalty levied u/s 271(1)(c) - additional income been offered voluntarily in the statement recorded u/s 132(4) - HELD THAT:- As no reference has been made to any corroborative incriminating material found during the course of search and penalty has been levied on the additional income been offered voluntarily in the statement recorded u/s 132(4). We are inclined to hold that the learned CIT (A) erred in confirming the penalty levied by AO u/s 271(1)(c) of the Act. - Decided in favour of assessee. Penalty u/s 271AAB - undisclosed income / additional income surrendered by the assessee voluntarily - HELD THAT:- Undisclosed income is defined in clause (c) of the explanation to section 271AAB (1) of the Act and the same means any income of the specified previous year represented, either wholly or partly by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found during the course of a search, which are not recorded on or before the date of search in the books of account maintained in the normal course. But under the given facts of the case, we find that no such incriminating material has been referred having nexus with the undisclosed income offered during the course of search. Now, this being the first step, which is sine qua non for proceeding ahead for visiting the assessee with the penalty under Section 271AAB of the Act and since the same is absent in the given case there is no jurisdiction left with the learned Assessing Officer to proceed with the initiation of penalty under Section 271AAB of the Act. As decided in Shri Paras mal Jain [ 2023 (7) TMI 1080 - ITAT JAIPUR] where it has been held that income surrendered is not to be construed as an undisclosed income specified in clause (c) to explanation of Section 271AAB(1) of the Act - Thus delete the impugned penalty of ₹5 lacs levied u/s 271AAB - Decided in favour of assessee.
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2024 (11) TMI 354
Non granting foreign tax credit relief u/s 90/90A - delay in filing Form No. 67 - HELD THAT:- We find that the decision of Bijender Singh [ 2024 (6) TMI 1397 - ITAT KOLKATA] is squarely applicable on the facts and circumstances of the case We find that since the assessee has furnished Form 67 giving valid information about FTC on the foreign allowances received in Hungary, we direct the ld. Assessing Officer to accept the Form 67 and allow the alleged foreign tax credit in accordance with law. Thus, the sole grievance raised by the assessee in various grounds of appeal is allowed.
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2024 (11) TMI 353
Reopening of assessment beyond period of limitation - Notice served beyond the time limit specified u/s 149 - HELD THAT:- Issue that notice u/s. 148 issued is barred by limitation is not correct sine the notice was issued within the period of six years on 28.03.2018 and there is no dispute regarding issuance of notice which was duly served on 02.04.2018. We have gone through the provisions of the Act, it talks about the issue of notice, the section 149 is very much clear that notice must be issued within the period as per section 149(1)(a)/(b). The section talks about the time limit specified for issue of notice only and not for the service of notice within the period specified. Accordingly ground rejected. Legality of assessment order and proceedings under the Insolvency Bankruptcy Code, 2016 - Financial creditor petition has been dismissed and at the time of passing the order, the AO had no any information about the NCLT order. The assessee is unable to show that the information was given to the jurisdictional assessing officer before passing the reassessment order Accordingly ground No.3 is rejected. Addition on the basis of documents submitted with Punjab National Bank which were audited financial statements - During the course of reassessment proceedings the notices issued by the AO were not complied by the assessee properly and a letter was written to the AO which is incorporated by the AO of his reassessment order. Accordingly with the consent of both the parties during the course of hearing, we remit the issue to the AO for de novo consideration and fresh decision as per law. The assessee is directed to file necessary documents that would be essential and required for substantiating its case and for proper adjudication by the revenue authorities. Appeal by the assessee is partly allowed for statistical purposes.
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Insolvency & Bankruptcy
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2024 (11) TMI 352
Maintainability of fresh application under Section 11(6) of the Arbitration and Conciliation Act, 1996, when no liberty to file a fresh application was granted by the High Court at the time of withdrawal of the first application - time limitation of fresh application under Section 11(6) of the Act, 1996 filed by the respondent on 09.12.2022 - entitlement for benefit of Section 14 of the Limitation Act - condonation of delay in filing the fresh arbitration application under Section 11(6) of the Act, 1996. Whether a fresh application under Section 11(6) of the Arbitration and Conciliation Act, 1996 is maintainable when no liberty to file a fresh application was granted by the High Court at the time of withdrawal of the first application? - HELD THAT:- Undoubtedly, an application under Section 11(6) of the Act, 1996 is not a suit and hence will not be governed stricto-sensu by Order 23 Rule 1 of the CPC. However, in a number of decisions, this Court has extended the principle underlying Order 23 Rule 1 to proceedings other than suits on the ground of public policy underlying the said rule. The appellant has submitted that in view of the aforesaid decisions, there is no reason why the principles of Order 23 Rule 1 should not be extended to an application for appointment of arbitrator under Section 11(6) of the Act, 1996. The principles of Order 23 Rule 1 are extended to proceedings other than suits with a view to bring in certainty, expediency and efficiency in legal proceedings. However, at the same time, it must also be kept in mind while extending the principles to legal proceedings other than suits that the principles are not applied in a rigid or hyper-technical manner. In the case of Vanna Claire Kaura v. Gauri Anil Indulkar Ors. [ 2009 (7) TMI 1401 - SUPREME COURT] the applicant filed a Section 11(6) application before the High Court of Bombay. A dispute was raised that the application was not maintainable as the agreements were in the nature of international commercial arbitration agreement under the Act, 1996 and the application for appointment would only lie before the Chief Justice of India. Accordingly, the applicant withdrew the Section 11 application and filed a Section 11(6) application before this Court. The subsequent application was opposed inter alia on the ground that arbitration was invoked by notice dated 14.03.2006 and was thereafter abandoned with the withdrawal of the petition from the High Court. Hence, the second application without the leave of the High Court would not be maintainable. However, this Court, negatived the objections against the application and proceeded to appoint the arbitrator. Coming to the facts of the case at hand, both the applications under Section 11(6) of the Act, 1996 were filed seeking adjudication of the dispute which arose on 02.02.2014 upon refusal of the appellant to pay the dues of the respondent. The first application under Section 11(6) was filed on 16.02.2018 and was subsequently withdrawn unconditionally on 01.10.2018. After a gap of more than four years, the respondent filed a subsequent application under Section 11(6) before the High Court on 09.12.2022 which came to be allowed by the impugned order - the respondent did not withdraw the first arbitration application because of some defect which would have led to its dismissal. It is also clear from the order dated 01.10.2018 of the High Court permitting the respondent to withdraw the application that neither any liberty was sought by the respondent nor the court had granted any liberty to file a fresh arbitration application - it can be said without any doubt that the respondent took a calculated risk of abandoning the arbitration proceedings to maximise the chances of succeeding in the IBC proceedings. Thus, in the absence of any liberty sought by the respondents from the High Court at the time of withdrawal of the first arbitration application, the fresh Section 11 petition arising out of the same cause of action cannot be said to be maintainable. A petition under Section 11(6) of the Act, 1996 is not a proceeding merely seeking the appointment of an arbitrator. It is in reality a proceeding for appointing an arbitrator and for commencing the actual or real arbitration proceedings. Whether the fresh application under Section 11(6) of the Act, 1996 filed by the respondent on 09.12.2022 is time-barred and if the respondent is entitled to the benefit of Section 14 of the Limitation Act? - HELD THAT:- In the case at hand, the respondent invoked the arbitration clause vide a notice dated 09.07.2016. Since there was no response to the said notice by the appellant, the respondent filed an application for appointment of arbitrator before the High Court under Section 11(6) of the Act, 1996 on 16.02.2018. Subsequently, it abandoned the application to pursue proceedings under the IBC - the first application under Section 11(6) filed on 16.02.2018 was well within the prescribed limitation period of three years for filing such applications. However, even assuming that the second application under Section 11(6) is not barred by the principles underlying Order 23 Rule 1, the same was required to be filed within a period of three years from the expiry of one month from the date of receipt of the notice invoking arbitration by the appellant. This period of three years came to an end in August, 2019. The second application under Section 11(6) came to be filed by the respondent much later on 12.12.2022 and is clearly timebarred. The High Court fell in error in holding that an application under Section 9 of the IBC and an application under Section 11(6) of the Act, 1996 are filed for seeking the same relief. While the relief sought in the former is the initiation of the CIRP of the corporate debtor, the relief sought in the latter is the appointment of an arbitrator for the adjudication of disputes arising out of a contract. Whether the delay in filing the fresh arbitration application under Section 11(6) of the Act, 1996 can be condoned under Section 5 of the Limitation Act? - HELD THAT:- The period of limitation to file an application under Section 11(6) of the Act, 1996 is governed as provided in Article 137 of the Schedule to the Limitation Act, that is, three years. It is observed that the benefit available under Section 14 of the Limitation Act will also be available in respect of applications made under Section 11(6) of the Act, 1996. Thus, in the absence of any specific statutory exclusion, there is no good reason to hold that the benefit under Section 5 of the Limitation Act cannot be availed for the purpose of condonation of delay caused in filing a Section 11(6) application. In Deepdharshan Builders Pvt. Ltd. v. Saroj, Widow of Satish Sunderrao Trasikar [ 2018 (11) TMI 1867 - BOMBAY HIGH COURT] , the Bombay High Court held that Section 5 of the Limitation Act would apply to an application filed under Section 11(6) of the Act, 1996. Similarly, the Delhi High Court in Yogesh Kumar Gupta v. Anuradha Rangarajan [ 2007 (2) TMI 714 - DELHI HIGH COURT] had observed that in view of Section 43 of the Act, 1996, Section 5 of the Limitation Act would be applicable to applications filed under Section 11(6) of the Act, 1996. The benefit under Section 5 of the Limitation Act is available in respect of the applications filed for appointment of arbitrator under Section 11(6) of the Act, 1996. Further, the requirement of filing an application under Section 5 of the Limitation Act is not a mandatory prerequisite for a court to exercise its discretion under the said provision and condone the delay in institution of an application or appeal. Thus, the only question that remains to be considered is whether in the facts of the present case, the respondent could be said to have made out a case for condonation of delay in instituting the fresh Section 11(6) application. The legislative intent of expeditious dispute resolution under the Act, 1996 must also be kept in mind by the courts while considering an application for condonation of delay in the filing of an application for appointment of arbitrator under Section 11(6). Thus, the court should exercise its discretion under Section 5 of the Limitation Act only in exceptional cases where a very strong case is made by the applicant for the condonation of delay in filing a Section 11(6) application. The appeal filed by the appellant is allowed and the impugned order passed by the High Court of Bombay is hereby set aside.
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Service Tax
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2024 (11) TMI 351
Entitlement to benefit of abetment 75% of the transportation charges - exemption notifications for Goods Transport Agency services - exemption notification No. 32/2004-ST dated 03.12.2004 and Notification No. 1/2006-ST dated 01.03.2006 - department is of the view that on verification of consignment notes issued by the Goods Transport Agency has revealed that the Goods Transport Agency have not given declaration on consignment notes to the effect of non-availment of Cenvat etc. HELD THAT:-The certified photocopies as well as declaration from the service providers namely various transport agencies such as M/s. Maruti Logistics etc. it has categorically been provided by the appellant during the course of hearing to the learned adjudicating authority that the service provider transport agency has declared that they have neither availed any credit of the duty paid on import or capital goods used for providing such taxable services under Cenvat Credit Rules, 2004 nor availed benefit of the Notification No. 12/2003-ST dated 28.06.2003 nor they are going to avail the benefit in future against the invoices issued to the service recipient. On perusal of and a scrutiny of the document submitted by the appellant we are convince that substantive compliance of the conditions provided under Notification No. 12/2003-ST dated 28.06.2003 as well as Notification No. 32/2004-ST dated 03.12.2004 has been made by the appellant and therefore the benefit of abetment 75% of the transportation charges cannot be denied to them. As decided in M/S EASTERN COALFIELDS LTD VERSUS COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, BOLPUR [ 2012 (10) TMI 492 - CESTAT KOLKATA] in absence of any particular format prescribed under the respective notifications, the department insisting for declaration on each consignment note for allowing the abatement under the said Notifications is unsustainable in law. In these circumstances the declarations filed by the Goods Transport Agencies (GTA) in their letter-heads or in the respective payment bills certifying that they have not availed Cenvat credit on inputs or capital goods nor availed the benefit of exemption Notification 12/2003-S.T., dated 20-6-2003 should have been accepted by the department in extending the benefit of Notification Nos. 32/2003-S.T. and 1/2006-S.T. In view of the above findings, we do not see any merit in the impugned orders passed by the Id. Commissioner. Consequently the order is set aside and the Appeals are allowed.
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2024 (11) TMI 350
Service tax demand being the 50% of the service tax payable by the appellant which it had not paid - Payment responsibility between the appellant and the service recipient - mis-understanding of the service tax provisions - Whether responsibility of the service recipient to pay the entire amount of service tax and the appellant is not liable at all? Interest was demanded u/s 75 and penalties were proposed under section 76, 77 and 78 of the Finance Act. HELD THAT:- Service tax has to be paid by the person responsible to pay it. In the normal course the service provider has to pay the service tax. If a notification is issued shifting fully or partly the responsibility of paying service tax to the service recipient, the service recipient is responsible to pay the service tax to that extent. The undisputed legal position is that in respect of the services rendered by the appellant 50% of the service tax had to be paid by the service recipient, which it did. The appellant, as service provider, was required to pay the remaining 50% of the service tax, which it had not. If service tax is paid on a service which is an input service for a taxable service rendered or a dutiable good manufactured the service recipient or manufacturer can take CENVAT credit of the service tax paid. It does not matter whether the service provider paid the service tax or the service recipient paid the service tax under reverse charge mechanism. So long as the service tax is paid on a taxable service and such taxable service is an input service, the service recipient can take credit. There is no provision for the service provider to take credit of the service tax paid on its output service. Even if service tax was paid under reverse charge mechanism by the service recipient, it is the service recipient who can take credit of the tax so paid and not the service provider. Learned counsel has completely mis-construed the legal provisions in claiming that the appellant is eligible to claim credit of the service tax deducted by the service recipient . It has been correctly observed by the Commissioner (Appeals) that the service tax liability does not get extinguished simply because the service recipient had not reimbursed the service tax component to the appellant. Appellant submitted that certain amounts were withheld by the service recipient in the bills of the appellant - Payment for the services rendered is a matter between the appellant and its service recipient. Whether the bills were fully paid or partly paid or any amounts were withheld for any reason is a matter to be settled between the appellant and the service recipient. So long as a taxable service is rendered, service tax has to be paid as per law. In this case, the liability of the service recipient was to the extent of 50% only and the department cannot charge anything more from the service recipient. The service recipient paid its 50% of the service tax. The appellant, as service provider, was required to pay 50% of the service tax which it had not paid. A show cause notice was, therefore, issued and the demands were confirmed with interest and penalty. Not only had the appellant not paid the service tax but it had also not filed any returns. The impugned order is upheld and the appeal is dismissed.
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2024 (11) TMI 349
Commercial or Industrial Construction Service - Hostel Building constructed for GAIMS (Gujarat Adani Institute of Medical Science) being an educational institute - Whether the extended period of limitation can be invoked? - HELD THAT:- We find that there is no dispute that the hostel building construction by the appellant is for Gujarat Adani Institute of Medical Science which is admittedly an educational institution. This Tribunal time and again held that construction of new building which is for the purpose of educational institution cannot be considered as commercial or industrial construction service . As well as Hon ble Rajasthan High court in the case of Jatan Constuction Pvt. Ltd. [ 2018 (8) TMI 629 - RAJASTHAN HIGH COURT] the issue in hand stand settled as the construction building of educational institute cannot be termed as commercial or industrial construction service . Accordingly, the service in question is not taxable under the said head. Hence the demand in the present case is not sustainable. The impugned order is set aside. The appeal is allowed.
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2024 (11) TMI 348
Service tax on the construction services rendered for the period prior to 1.7.2010 - HELD THAT:- We find the assertion of learned Advocate is correct in as much as various Benches of CESTAT have taken a consistent view that the service tax was not leviable on a developer prior to 1.7.2010, by following the decision of Larsen Toubro Ltd. [ 2015 (8) TMI 749 - SUPREME COURT] . Thus, no justification for levy of service tax on the appellant / developer for the period prior to 1.7.2010 and hence, the impugned order cannot sustain.
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2024 (11) TMI 347
Refund claim in respect of service tax paid for services provided to their milk unions during the period 01.04.2014 to 30.06.2014 on 27.03.2015 - HELD THAT:- The present refund application pertains to the period when the negative list regime was in force, where the levy of service tax u/s 66B required the presence of a 'service' as defined u/s 65B(44) of the Act. In order for a transaction to qualify as a 'service', it is the prerequisite that there is a service provider, a service recipient and 'consideration'. In the present case, we observe that the Appellant had rendered services to milk unions in the nature of promotion, marketing, business analysis, etc. Against these services, the Appellant collected a service fee on which service tax was discharged on the applicable rate. On account of an AGM and resulting order dated 13.10.2014, the service fee was entirely waived on a retrospective basis for the period 01.04.2014 to 30.06.2014. Pursuant thereto the Appellant refunded the entire service fee to the milk unions along with the service tax recovered from them. There is no dispute on this fact. The present refund of service tax paid by the Appellant was filed on account of such waiver of consideration. Once the consideration (service fee) was refunded by the Appellant to the milk unions, the transaction between the two parties no longer qualified as a 'service' and no service tax would be leviable thereupon. Prior to the waiver of service fee, the activities undertaken by the Appellant qualified as a taxable service in terms of Section 65B(44) of the Act, wherein the Appellant carried on the promotion, marketing, analysis, etc, of the business of the milk unions. Appellant also discharged service tax on the service fee received from the milk unions. Since, preceding the full waiver of service fee, there is no dispute that the Appellant was rendering a 'service' to the milk unions and that post waiver the appellant has issued credit notes to all milk union members for the amount of service tax as was collected from them, the appeal the service tax so paid is refundable to the appellant.
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2024 (11) TMI 346
Service tax of unbilled amount - Service Tax on an amount considering the same as part of the gross value which was neither towards any provision of service nor the same was billed by the appellant and consequently, the same was not paid by the service recipient - HELD THAT:- Section 67 is very clear that only gross amount charged from the service recipient shall be considered as the gross value towards the service provided and that alone shall be chargeable to service tax. In the present case, since, the amount on which the service tax was demanded has admittedly not been charged by the appellant to their service recipient, the same is not a part and partial of gross value as enumerated in Section 67. Therefore, the unbilled amount is not liable to service tax. This issue in the appellant s own case has been considered in Linde Engineering India Pvt. Ltd and others Vs, Union of India and others [ 2024 (7) TMI 384 - GUJARAT HIGH COURT] which has relied on the land mark judgment of Hon ble Supreme Court in the case of Intercontinental Consultants Technocrats Pvt. Ltd [ 2018 (3) TMI 357 - SUPREME COURT] it was held that the unbilled amount cannot be liable to service tax. Assessee appeal allowed.
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2024 (11) TMI 345
Wrongly taken and utilized the Cenvat Credit of Service Tax paid on foreign commission, under reverse charge - amount of availed Cenvat credit is proposed to be reversed alongwith the interest and the appropriate penalties - Applicability of extended period of limitation - HELD THAT:- The bare perusal makes it clear any activity which amounts to sales promotion i.e. the service by way of sale of dutiable goods on commission basis is eligible for availment of Cenvat credit. One of the obligations fastened on the said agent vide the said agreement is that he had to assist the appellant in respect of the payments from the buyers under the concluded contracts. In addition, to imparting information about various tenders, market rents, competitive possibilities etc. the agent obligation was to procure the sale orders to take care about possible damage to the appellants seller. Clause 4 of the agreement reveals that the commission was agreed to be at the rate of two percent of the net invoice value and the payment was agreed to be remitted in US$ to the Bank Account of the appellant only after the full payment from the customer is received. These clauses have also been observed by the original adjudicating authority of the Order-in-Original. Despite observing these paragraphs we do not find any reasonable explanation in the said order to deny the arrangement between the appellant and the agent and the purpose for appointing him for the sales promotion activity. No reason to sustain those findings. It is held that appellant has rightly availed the Cenvat Credit on the amount of commission paid to its sales agent. The allegations in the Show Cause Notice of suppression are therefore held to be redundant based whereupon the Department has invoked the extended period of limitation while issuing the Show Cause Notice. For the said reason the Show Cause Notice itself is held to be barred by time.
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Central Excise
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2024 (11) TMI 344
Imposition of penalty under Rule-26 of the Central Excise Rules, 2022 on the Appellant who was Director of sales and marketing of co-noticee Company - Non-responsive attitude of the Respondent Department - Interpretation of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - HELD THAT:- Even after noting in his order that Appellant looked after Sales and Marketing activities of goods produced by the Appellant company, he is fastened with penal liability for manufacture of the goods by the Appellant Company and since excise duty is on the manufacture and its sales and marketing are post occurrence activities, in which Appellant was apparently engaged, there can not be a personal liability on the Appellant when learned Commissioner himself has noted that Appellant was part of the team entrusted with the task of determining the pricing of various products and regarding his duty concerning payment/nonpayment of appropriate excise duty, nothing is available in the entire case records to implicate him as a person equally responsible for evading payment of tax. Therefore, it is a fit case where Appellant is in a win win situation for the reasons that the order of penalty imposed on him has already been set aside by CESTAT and no further proceedings like re-adjudication or Appeal was initiated against him and thereby the order passed by the CESTAT in 2015 has become final, apart from the fact that even without an application from the Appellant under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 , penalty recoverable from him should be treated as NIL in view of operation of section 124(1)(b) of the Amended Finance Act, 2019 and that the charge labelled against Appellant imposing penalty as a punishment is as such, unsustainable in both law and facts. There exists no re-adjudication scope - Appeal allowed.
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2024 (11) TMI 343
Contravention of provisions of Rule 8(3A) of the Central Excise Rules, 2002 - failure to make full payment of duty within prescribed time limit as provided under Rule 8 of Central Excise Rules, 2002 - bar on utilization of CENVAT credit for payment of duty - invocation of Extended period of limitation - penalty - HELD THAT:- The issue as to whether the Assessee can utilise the CENVAT credit toward payment of duty when in default is no more res integra and many judicial authorities have held that the provision of Rule 8(3A) of Central Excise Rules, 2002 as ultravires to the Main Act. The Hon ble Gujarat High Court in the case of INDSUR GLOBAL LTD. VERSUS UNION OF INDIA 2 [ 2014 (12) TMI 585 - GUJARAT HIGH COURT ] struck down the condition in Rule 8(3A) for payment of duty without utilizing the CENVAT credit as unconstitutional and invalid. The Hon ble High Court of Bombay in the case of THE COMMISSIONER OF CENTRAL EXCISE CUSTOMS NASHIK II COMMISSIONERATE VERSUS M/S. NASHIK FORGE PVT. LTD. [ 2018 (9) TMI 1582 - BOMBAY HIGH COURT ] has held that Rule 8(3A) to be unconstitutional as it infringes upon the substantive right of an assessee to utilize Cenvat credit. Further, the Tribunal in the case of INDUS TROPICS LTD VERSUS C.C.E. S.T. -RAJKOT [ 2023 (3) TMI 950 - CESTAT AHMEDABAD ] has followed the decisions of various High Court to set aside the demand alleging violation of Rule 8(3A) of Central Excise Rules, 2002. The appeal was referred to the Lok Adalat proceedings before the Hon ble Supreme Court and settlement has been arrived at. The effect is that the stay order having merged with the order of settlement, stands vacated. The decision rendered by the Hon ble High Courts of Gujarat and Madras in the above cases would revive and be in force as a Precedent. The demand raised alleging violation of Rule 8(3A) cannot sustain and requires to be set aside - Appeal allowed.
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CST, VAT & Sales Tax
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2024 (11) TMI 342
Challenge to orders - Wrongful typing of prayer - no order passed by any authority - HELD THAT:- It is not in dispute that the petitioner did not deposit any tax with the authorities of Himachal Pradesh despite the fact that it had been running its buses within its territory and thus, in this manner, it deprived the State of Himachal Pradesh of its legitimate amount of tax. Once that be so, obviously, it would be liable to pay interest, for it is more than settled that a person or authority deprived of use of money to which one is legitimately entitled to has a right to be compensated for the deprivation, which may be called interest, compensation or damages. Reference in this regard can conveniently be made to the Constitution Bench judgment of the Hon ble Supreme Court in SECRETARY, IRRIGATION DEPARTMENT, GOVT. OF ORISSA VERSUS GC. ROY [ 1991 (12) TMI 268 - SUPREME COURT ]. The petitioner instead of assailing the orders passed by the authorities below, which are in consonance with the law, should have in fact moved the tax authorities in Punjab for the refund of the tax or a part thereof, that according to it had been paid by inadvertence or if the tax was wrongly paid, recovered or retained, it was there that the petitioner could have concomitantly invoked the doctrine/principles of unjust enrichment, equity, justice and good conscious - Having legally ordered to be recovered, that too, strictly in consonance with the provisions of the PGT Act, any other interpretation would lead to an incongruous conclusion, as the State cannot be deprived of its due share of tax and interest on the belated payment. There are no merit in the petition and the same is accordingly dismissed. 50% of the amount deposited in the Registry of this Court is directed to be refunded to the State on furnishing its account number and the petitioner is directed to deposit the remaining 50% of the interest liability alongwith interest as payable under Section 12-A of the PGT Act if not already deposited in the Registry of this Court within a period of one month from today - petition disposed off.
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2024 (11) TMI 341
Challenge to Assessment orders passed under Section 27 of the TNVAT Act, 2006 - allegations against the petitioner was that the petitioner had availed input tax credit under Section 19 of the TNVAT Act, 2006 on the dealers whose registrations were cancelled - HELD THAT:- Having perused the notices that preceded the impugned order and the reply of the petitioner and the impugned orders, this is a fit case for quashing the impugned order and remitting the case back to the respondent to pass a fresh order on merits after furnishing copies of the orders cancelling the registration certificate of the respective dealers. This exercise may be carried out by the respondent within a period of 30 days from the date of receipt of a copy of this order. It is for the petitioner to thereafter file a fresh/additional reply within a period of 30 days thereafter. The impugned order which stands quashed shall be treated as addendum to the Show Cause Notice dated 05.07.2016. The entire exercise shall be completed within a period of six months from the date of receipt of a copy of this order. Petition allowed.
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Indian Laws
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2024 (11) TMI 340
Validity of the Explanation to Rule 38 of the Mineral (Other than Atomic and Hydrocarbons Energy Minerals) Concession Rules, 2016 - Explanation to Rule 45(8)(a) of the Mineral Conservation and Development Rules, 2017 - computation of royalty to be levied for the extraction or consumption of mined ores - Whether, the Explanation(s) appended to Rule 38 of the MCR, 2016 and Rule 45 of the MCDR, 2017 respectively are unreasonable and manifestly arbitrary and in consequence of violation of Article 14 of the Constitution? HELD THAT:- In M.P. OIL EXTRACTION VERSUS STATE OF M.P. [ 1997 (7) TMI 660 - SUPREME COURT ], this Court held that policy decisions are the domain of the executive authority of the State and that the courts should not embark on the unchartered ocean of public policy and should not question the efficacy or otherwise of such policy so long the same does not offend any provision of the stature or the Constitution of India. It further observed that unless the policy framed is absolutely capricious or not informed by reasons, the court cannot and should not outstep its limit and tinker with the policy decision of the executive functionary of the State. In PREMIUM GRANITES VERSUS. STATE OF T.N. [ 1994 (2) TMI 302 - SUPREME COURT ], this Court observed that it is not the domain of the courts to consider as to whether a particular policy is wise or that a better public policy can be evolved, and that such matters must be left to the discretion of the executive and legislature. In BALCO EMPLOYEES UNION (REGD.) VERSUS UNION OF INDIA [ 2001 (12) TMI 808 - SUPREME COURT ] this Court held that it is not for the courts to consider the relative merits of different economic policies and consider whether a better policy may be evolved. It further held that when it comes to policy decisions on economic matters, the courts ought to be very circumspect in disturbing such conclusions unless there is an illegality in the decision itself. While courts have the power of judicial review to ensure that executive actions and legislative enactments comply with the Constitution, this power is not absolute. Judicial review is meant to act as a safeguard against actions that overstep legal boundaries or infringe on fundamental rights, but it does not entail a comprehensive re-evaluation of the policy s wisdom. The judicial review of policy decisions is limited to assessing the legality of the decision- making process rather than the substantive merits of the policy itself. In the present case, there is no doubt that the mechanism for computation of royalty in terms of Rule 38 of the MCR, 2016 and Rule 45 of the MCDR, 2017 devised by the respondents might have onerous implications in monetary terms on the mining leaseholders inasmuch as there is a compounding effect on the rate of royalty for every subsequent month. However, this Court in the absence of anything to show that such policy is in excess of the powers or domain of the respondents herein or in breach of any statutory provision, cannot strike down the same. Merely because the Explanation(s) to Rule 38 of the MCR, 2016 and Rule 45 of the MCDR, 2017 provides that there shall be no deduction of royalty, payments to the District Mineral Foundation and payments to the National Mineral Exploration Trust from the gross amount for the purpose of computing sale value does not in any manner makes the aforesaid Explanation in derogation of the main provision. The aforesaid Explanation(s) are merely clarificatory in nature inasmuch as it explains the ambiguities in the main provisions of Rule 38 of the MCR, 2016 and Rule 45 of the MCDR, 2017, and thus, they cannot be said to exceed the ambit of the main provisions or in contravention of the statutory scheme. Whether the exclusion of royalty, and contributions towards DMF and NMET paid previously for coal but not for other minerals is unreasonable and manifestly arbitrary? - HELD THAT:- In RK. GARG VERSUS UNION OF INDIA AND OTHERS [ 1981 (11) TMI 57 - SUPREME COURT ], this Court observed that laws relating to economic activities should be viewed with greater latitude and the legislature should be allowed some play in the joints, because it has to deal with complex problems which do not admit of solution through any doctrinaire or strait-jacket formula. The respondents a period of 2-months from the date of pronouncement of this judgment to conclude the public consultation process undertaken for amending the MMDR Act initiated pursuant to the Notice dated 25.05.2022 and take a final decisive call in regard to the cascading impact of royalty on royalty in the calculation of the average sale price by virtue of the Explanation(s) to Rule 38 of the MCR, 2016 and Rule 45 of the MCDR, 2017. The challenge to the validity of Explanation(s) appended to Rule 38 of the MCR, 2016 and Rule 45 of the MCDR, 2017 is answered accordingly. The Registry shall notify this matter before an appropriate Bench after a period of two months from the date of pronouncement of this judgment to report compliance of the directions.
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2024 (11) TMI 339
Seeking appointment of an arbitrator for the adjudication of disputes and claims in terms of Clause 13.10 of the Shareholders Agreement dated 25.07.2011 entered into between the petitioner and the respondents - Section 11(6) read with Section 11(12)(a) of the Arbitration Conciliation Act, 1996 - whether a reference under Section 11(6) of the Act, 1996 to be declined by examining whether the substantive claims of the petitioner are ex facie and hopelessly time barred? HELD THAT:- A three-judge bench of this Court in Vidya Drolia Ors v. Durga Trading Corporation [ 2020 (12) TMI 1227 - SUPREME COURT] while dealing with the scope of powers of the referral court under Sections 8 and 11 respectively, endorsed the prima facie test and opined that Courts at the referral stage can interfere only in rare cases where it is manifest that the claims are ex facie time-barred and dead, or there is no subsisting dispute. Such a restricted and limited review was considered necessary to check and protect parties from being forced to arbitrate when the matter is demonstrably non-arbitrable and to cut off the deadwood. In Bharat Sanchar Nigam Limited and Another v. Nortel Networks India Private Limited [ 2021 (3) TMI 447 - SUPREME COURT] , the notice invoking arbitration was issued 5 years after the cause of action arose, i.e., rejection of the claims of Nortel by BSNL and the claim was therefore held to be ex facie time-barred. This Court clarified that the period of limitation for filing a petition seeking appointment of an arbitrator(s) cannot be confused or conflated with the period of limitation applicable to substantive claims made in the underlying commercial contract. The substantive claims of the petitioner are ex-facie time barred and therefore, incapable of being referred to arbitration. The respondents contend that, with respect to the issue relating to the 2,00,010 equity shares, the petitioner has sought enforcement of the letter dated 22.09.2011 but has however, served a notice invoking arbitration 6 years later on 23.01.2017. Further, with respect to the 4,00,000 equity shares, it was contended that the claim can only arise upon the date of resignation i.e., 18.07.2013 and the claim would, therefore, again be time-barred. It is now well settled law that, at the stage of Section 11 application, the referral Courts need only to examine whether the arbitration agreement exists nothing more, nothing less. This approach upholds the intention of the parties, at the time of entering into the agreement, to refer all disputes arising between themselves to arbitration. However, some parties might take undue advantage of such a limited scope of judicial interference of the referral courts and force other parties to the agreement into participating in a time- consuming and costly arbitration process. The existence of the arbitration agreement as contained in Clause 13.10 of the Shareholders Agreement is not disputed by either of the parties. The submissions as regard the claim of the petitioner being ex-facie time barred may be adjudicated upon by the arbitral tribunal as a preliminary issue - Petition allowed.
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